Stock Market Sends Some LMAO Signals to Start 2021

Wednesday, January 13, 2021 5:06 PM | Nick Dey

From start to finish, 2020 took the world for one of the the least comfortable rides in modern history, causing even the least social of us yearn for human interaction.

And while 2021 is already trying to make the case that sequels are, in fact, worse than the original, it seems as though the year may also be a little more quirky and unique than its predecessor which should, at the very least, provide people with some much-needed comedic relief.

While 2021 started the year off in the darkest of fashions, with violence and insurrection that was - at the very least - egged on by the most powerful person in the free-world as well as warnings from the FBI of more dark days to come, there have been several laughable moments for investors to smile about.

For starters, LMF Acquisition Opportunities, or coincidentally of course, LMFAO for short, is the latest SPAC to throw a hat in the ring and is looking to trade under the slightly more acceptable acronym of LMAO.

However, if imitation is truly the sincerest form of flattery, then perhaps the greatest form of comedy is when imitation goes very wrong. On Monday, Tesla (TSLA) CEO and world’s richest person tweeted "Use Signal". Musk intended to recommend Signal the encrypted messenger service, but accidentally sparked a rally in Signal Advance Inc (SIGL) stock.

SPACing Around

While the number of companies being taken public by SPACs has ballooned, and even become a cause for concern by many investors who remember the dot-com bubble in the late 1990s, there has yet to be a more audacious or comical SPAC than LMF Acquisition Opportunities (LMAO).

This is a peculiar development because the sponsor company, whose fell nearly 20% Tuesday to $1.97, hasn't really demonstrated a lot of success running its current business recently. While even some of the most solid companies in the world have experienced runs on their stock before, LMFA’s price move seems rather emblematic of a stock which just three years ago was trading at $14.50 and at $87.50 a mere five years ago.

The SPAC, LMFAO, will help LM Funding acquire another company within it’s sector for between $250 million and $500 million. The purchased company is supposed to get the benefit of the expertise of the management team behind the SPAC, but LM Funding's share price, and recent corporate history, which includes delisting warnings, delayed earnings reports, and negative year-over-year revenue growth in every quarter except one since the fourth quarter of 2017, makes that proposition seem questionable.

So this raises the question, are they aiming to acquire a company to expand the business, or is this a way to hit the reset button and go back to more successful days?

Also, considering that a SPAC is essentially a bet that the management team can find a private company and convince them that their expertise will add value, we are unsure if the company’s recent history makes this a SPAC a private company is going to want to do a deal with, particularly when we seem to be in market saturated with SPACs looking for good deals. The best move for investors here may actually be to just sit back and LMAO at this one.

Tomato…Potato?

With the President currently banned from Twitter, users, and investors, are looking for someone else to fill the attention void. And while there is currently a power struggle caused by the gaping void the President left behind, user @elonmusk, whose day job is to be CEO of several companies, gained an edge over his competitors after cryptically tweeting “Use Signal”. This tweet spurred many to invest in a public company named Signal Advance Inc (SIGL), which has nothing to do with the messaging service of the same name and, prior to this tweet, didn't even trade shares every day. The stock rallied thousands of percent, and while it's given most of that back, is still well above it's previous price.

This is by no means the first time that investors have accidentally rallied to the wrong stock, but it may just go down as the most extreme. Investors wanting to buy into Zoom Video Communications (ZM) were responsible for an 1,800% rally in Zoom Technologies (ZOOM) and at the very least partially responsible for hastening the company’s removal by the SEC from the market. Meanwhile, you can’t even Google Tiziana Life Sciences by their ticker “TLSA” without the search engine auto-correcting you over to results for Tesla Motors (TSLA).

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