A short post on small position that illustrates asymmetrical outcomes. I was hoping to get more than 300 shares in VM Hotels Acquisition Corp., but the SPAC has barely traded on the Venture Exchange since its IPO.
VCM Global Asset Management raised US$100-million with the idea of investing in financially distressed hotels and profiting from a post-pandemic recovery in travel. Unfortunately for VCM they didn’t account for the run up in hotel and travel-related businesses. At current valuations I doubt there is a hotel purchase that would make financial sense for a buyer without existing scale, particularly when the founder shares and warrants are factored into the purchase price. But the only bad outcome for me of holding VM Hotel shares I bought for around $9.50 is opportunity cost:
- Scenario 1: No transaction is completed. I get $10/share plus interest back in two years. Better than a savings account.
- Scenario 2: Transaction is announced and VMH stock tanks on the news. I vote against the deal and I get $10/share back via redemption. Still better than a savings account.
- Scenario 3: Transaction is completed, VMH pops on the news and I sell. Much better than a savings account.
- Scenario 4: Transaction is completed, VMH pops on the news and I hold.
My downside is making US$150 over two years on money that could have been better deployed into Ether Capital or Three Valley Copper, my top positions where I am looking to add.
I won’t be buying more VMH even if it was possible, but I will hold what I have until I can assess an acquisition or my money is returned.
