FATH low float bull thesis no longer holds

TLDR FATH was a low float pump, shares are now unlocked and the low float thesis is dead, it has been dipping and may continue to slide back to where it was pre-pump. ​ Intro FATH RECAP I haven’t seen any DDs about the FATH float increase and potential dump; there are quite a few posts about the low float thesis, some on /r/SPACs [ex1, ex2]. In short, FATH was pumped because it briefly had a low float, of about 2.3m [link], the desired outcome was something like what we saw with ESSC and IRNT (multibaggers on shares alone). Unfortunately, that outcome did not come true and the low float bull thesis now no longer holds, and we should see FATH continue to dump. I’m posting based on the findings of @eggplatypus, who had a solid previous dump callout on Heliogen (ATHN --> HLGN), which I also posted about (shares alone dropped >60% from when I posted). ​ FATH ISSUES SUMMARY The main issues with FATH is that the original thesis is dead, it’s a bit of a shitco (high redemption) and dumped almost immediately on deSPAC once $10 NAV floor was removed, and near-term expiration call option open interest (OI) is insanely high. ​ Details LOW FLOAT THESIS IS DEAD PIPE shares were unlocked on January 31st, adding ~7m shares to the float. Total float is now 9.4m shares [link, direct quote from tweet], you can see this information on page 1 of their S-1 filing from 1/14/22 [link]. Honestly we could stop here 🤠 ​ KIND OF A SHITTY COMPANY, ALREADY DUMPED This is a “digital” manufacturing company that does not turn a profit and trades at 7.3x EV/R and 27.5x EV/EBITDA (enterprise value to revenue explanation, ev/ebitda explanation). The average EV/EBITDA for a manufacturing company is 13.9x [link]. FATH has a higher multiple than most manufacturing companies and is easily in the 99th percentile of valuations -- FATH is plainly expensive. You can see this reflected on the income statement and condensed income statement on pages 114 and 191 of their S-4 filing from 11/16/21 [link]. This is not new news to investors, FATH hit a low of $5.04 and was comfortably below $7/sh for about the two weeks almost immediately after deSPAC [link], before the low float idea began gaining momentum in early January. It is not unreasonable to expect that now that the pump thesis is dead FATH should again fall below $7/sh. ​ GAMMA UNWIND 😵‍💫 By now I’m sure you all hate the word gamma in posts, but I promise this is (hopefully) a little different. Presumably because of the old low float idea, there are still a large number of OTM FATH calls being held. For the 2/18 expiry, there is ~18,000 in OI for the 10C and ~3,000 OI for the 12.5C [link, data from 2/8 EOD] ... the stock is currently at $8.5, so a ~+18% and ~+47% difference, probably not happening. Since the stock has gone sideways and down over the last week or so, it is not unreasonable to think that the call holders will begin to sell off as expiry approaches. Oh and we’re seeing inflation jitters lol (CPI comes out tomorrow btw, 7.3% expected) so the market itself is not looking great. As people sell their calls, shares of FATH purchased by market makers (MMs) to cover their short call position are sold off (explanation of similar phenomenon with options expiry sell-offs, from SpotGamma), potentially resulting in a parabolic move downwards or at the very least exacerbating the dump like we saw with HLGN ($15+ → sub $4). ​ Summary So, to recap: the old thesis propping this up is no longer true, this is kinda known to be a shitco and already dumped before, and dumping by call holders might result in a dump in shares by MMs. That’s all folks! GLTA, full disclosure I do have FATH puts.

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FATH low float bull thesis no longer holds

bearish

TLDR

FATH was a low float pump, shares are now unlocked and the low float thesis is dead, it has been dipping and may continue to slide back to where it was pre-pump.

Intro

FATH RECAP

I haven't seen any DDs about the FATH float increase and potential dump; there are quite a few posts about the low float thesis, some on /r/SPACs [ex1, ex2]. In short, FATH was pumped because it briefly had a low float, of about 2.3m [link], the desired outcome was something like what we saw with ESSC and IRNT (multibaggers on shares alone).

Unfortunately, that outcome did not come true and the low float bull thesis now no longer holds, and we should see FATH continue to dump. I'm posting based on the findings of @eggplatypus, who had a solid previous dump callout on Heliogen (ATHN --> HLGN), which I also posted about (shares alone dropped >60% from when I posted).

FATH ISSUES SUMMARY

The main issues with FATH is that the original thesis is dead, it's a bit of a shitco (high redemption) and dumped almost immediately on deSPAC once $10 NAV floor was removed, and near-term expiration call option open interest (OI) is insanely high.

Details

LOW FLOAT THESIS IS DEAD

PIPE shares were unlocked on January 31st, adding ~7m shares to the float. Total float is now 9.4m shares [link, direct quote from tweet], you can see this information on page 1 of their S-1 filing from 1/14/22 [link]. Honestly we could stop here 🤠

KIND OF A SHITTY COMPANY, ALREADY DUMPED

This is a “digital” manufacturing company that does not turn a profit and trades at 7.3x EV/R and 27.5x EV/EBITDA (enterprise value to revenue explanation, ev/ebitda explanation).

The average EV/EBITDA for a manufacturing company is 13.9x [link]. FATH has a higher multiple than most manufacturing companies and is easily in the 99th percentile of valuations -- FATH is plainly expensive.

You can see this reflected on the income statement and condensed income statement on pages 114 and 191 of their S-4 filing from 11/16/21 [link].

This is not new news to investors, FATH hit a low of $5.04 and was comfortably below $7/sh for about the two weeks almost immediately after deSPAC [link], before the low float idea began gaining momentum in early January. It is not unreasonable to expect that now that the pump thesis is dead FATH should again fall below $7/sh.

GAMMA UNWIND 😵‍💫

By now I'm sure you all hate the word gamma in posts, but I promise this is (hopefully) a little different. Presumably because of the old low float idea, there are still a large number of OTM FATH calls being held. For the 2/18 expiry, there is ~18,000 in OI for the 10C and ~3,000 OI for the 12.5C [link, data from 2/8 EOD] ... the stock is currently at $8.5, so a ~+18% and ~+47% difference, probably not happening.

Since the stock has gone sideways and down over the last week or so, it is not unreasonable to think that the call holders will begin to sell off as expiry approaches. Oh and we're seeing inflation jitters lol (CPI comes out tomorrow btw, 7.3% expected) so the market itself is not looking great.

As people sell their calls, shares of FATH purchased by market makers (MMs) to cover their short call position are sold off (explanation of similar phenomenon with options expiry sell-offs, from SpotGamma), potentially resulting in a parabolic move downwards or at the very least exacerbating the dump like we saw with HLGN ($15+ → sub $4).

Summary

So, to recap: the old thesis propping this up is no longer true, this is kinda known to be a shitco and already dumped before, and dumping by call holders might result in a dump in shares by MMs.

That's all folks! GLTA, full disclosure I do have FATH puts.

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3 min
7.00
Target Price
8/ 10
Confidence
2-6 Months
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