Akerna Corp., née MJ Freeway, née MTech Acquisition Corp., still hasn’t disclosed the number of shares redeemed in their recent combination vote, although we have already inferred that there were probably a significant amount of shares redeemed.  This is inferred from the need for a last-minute backstop-PIPE for $9.2 million, as well as not disclosing right away just how many shares were left after their vote.  Neither of those “inferences” are very scientific, but if you’ve seen enough of these vehicles close, you can sort of connect the dots.

However, due to that low float, we are now seeing tremendous volatility in the stock. To wit, yesterday, MTEC (old symbol) jumped to $14.69 before closing at $11.99 on volume of 199,336.  Today, KERN (new symbol) has reached as high at $19.47 (so far), but is currently trading around $15.50 on volume of ~109,000. It’s not normal to have ~30-50% price swings in a given day. However, while KERN probably had a significant amount of redemptions, it was probably not on the scale of a PHUN, ORGO or HUNT.  All three of those previous deals had their trust nearly wiped out completely.  So while we still don’t know what KERN’s float actually looks like, there are most likely more shares left than those previous three.

However, there are two things to keep in mind: One, KERN/MTEC did not have a right included in its SPAC unit. Two, the $9.2 million of shares issued to PIPE investors are not registered yet and therefore, not trade-able.  Furthermore, the shares issued to the seller in the KERN transaction are subject to a one-year lock-up.  This means, the only shares that are currently trading are the ones that didn’t redeem in the vote. This is similar to what happened with PHUN, since Stellar Acquisition III, did not have a right included in its unit and did a last minute $6 million convertible Series A preferred stock PIPE.

Ironically, having a Right is kind of advantageous in these types of low-float situations since it at least provides some liquidity shortly after closing and as a result, a more accurate share price.  However, neither KERN, PHUN, HUNT or ORGO had rights included in their SPAC’s unit and all traded wildly.  Having a Right causes other problems (additional dilution), but they do provide much needed liquidity in the event of significant redemptions.

However, what IS different about KERN are their warrants. KERN/MTEC’s public warrants were previously registered in their S-4/Proxy prior to the close of the business combination.  That means warrants holders will be able to exercise their warrants 30 days from combination close, or July 17th. So really, this volatility should be short-term.

If you recall, while PHUN’s share traded as high as $550, their warrant price hovered around $0.50 and $0.60.  That created a pretty big mismatch between intrinsic value and trading value. That is, until the shares underlying the warrants were registered and could be traded upon exercise. KERN’s warrants, on the other hand, are already registered.  Warrant holders just need to wait 30 days to exercise and as of today, KERN’s warrants have traded as high as $2.38.

Plus, it could just be that investors feel slightly more positive about the longer term prospects of the company and therefore, warrant investors are willing to give it a shot. KERN may not look like a slam dunk right now, but when it’s a 5-year warrant, it could be a good bet.  Especially when you can still get warrants cheaply. It is a cannabis-adjacent company, after all, and cannabis has been hot.

Nonetheless, it’s interesting to compare.  Let’s see what happens over the next month.