Stellar Acquisition III, now Phunware (PHUN), released the results of their shareholder vote last night and for the most part, the results were unsurprising. 1,813,487 shares of Stellar common stock exercised their right to redeem their shares for cash at a price of $10.64 per share. This means that approximately $19.3 million was removed from the trust.
If you recall from Stellar’s proxy, there was $19.63 million held in trust as of November 12th, and with an additional month’s worth of interest earned, the total held in trust at combination was most likely closer to $19.7 million. The press release further goes on to say that as a result of those redemptions, the Stellar trust account had only approximately $0.4 million immediately prior to Closing.
Basically, everyone redeemed.
However, if you look at Phunware’s share price, it’s currently trading at $14.26 and yet, the warrants are trading at $0.30. Hmmm…that seems to be a major disconnect. However, the facts are this: None of the SPAC investors wanted to hold this share post-combination so nearly everyone redeemed. Furthermore, it would appear that none of the capital markets advisors were able to get the shares into the hands of new investors either. Hence, Stellar kept needing to adjourn the vote until they could bring in the convertible preferred investor for $6.0 million. Furthermore, if you look at the 8-k, they attached Phunware’s financial statements. Phunware shows only $5.2 million in revenue for Q3, which is about 30% less than the same quarter in 2017, which showed $7.4 million….very curious indeed.
So if nobody wanted to hold this share pre-vote, how is it magically now worth $14.26 a week later?
There is very little liquidity, and that’s certainly contributing, but who is buying if exactly only one week ago there was zero demand? If something doesn’t make sense, that’s a huge caution sign. Be careful out there….