Stock in ESS Inc., the region’s newest publicly traded company, was up dramatically Tuesday morning, apparently the latest case of day traders targeting a just-closed SPAC merger.
The Wilsonville grid-scale battery maker began trading Monday morning on the New York Stock Exchange under the ticker symbol GWH. The stock was worth $8.21 when ESS’ SPAC merger closed on Friday.
After a slow start on in its first day of trading, the stock began picking up steam and closed up 27% to $10.42.
Then overnight traders piled in, sending the stock to $15.83 to open on Tuesday, then up past $21 at 8:15 a.m. Pacific, just under two hours into the trading day.
The turn of events mirrors what has happened to several other companies that, like ESS, saw investors in their SPAC partner redeem a high number of shares before the merger closed.
“Retail investors are targeting SPACs whose shareholders (often hedge funds) exercise en masse their right to ask for their money back, rather than fund their blank-check mergers,” Bloomberg’s Chris Bryant wrote of the phenomenon.
The redemptions reduce a company’s number of outstanding shares, adding to volatility and making the stock a possible target for short sellers. That can then lead to a short squeeze, with shorts forced to buy shares to cover their bets in a tight market — sending the stock even higher.
In August, a cybersecurity offering called IronNet saw more than 90% of its SPAC investors redeem their shares. But the stock rose from $10.13 when it began trading in late August to $41.40 by mid-September. The lofty status was short-lived however: IRNT came back to Earth and was trading at $11.89 Tuesday morning.
ESS is virtually without revenue at this point, but has forecast sales of its iron flow battery rising from a negligible $2 million this year to $3.5 billion by 2027 as the transition to renewable energy sources makes storing energy vital to a reliable grid.
The company’s major backer is SB Energy Global Holdings One Ltd., which owned more than 20% of the stock when the SPAC merger closed. Another big investor is Breakthrough Energy Ventures LLC. That fund was founded by Bill Gates, and the Gates-ESS connection, which dates back to 2019, has helped raise the company’s profile.
