Weekend thoughts: More $TMC shenanigans

A few weeks ago, I posted on the shenanigans at TMC. I’d encourage you to read the whole article for a full background, but is the company went public through a SPAC that saw an very high redemption rate (more than 90% of shareholder redeemed, leaving under 3m shares publicly traded). In addition to the high redemption, over $200m of their PIPE failed to deliver on their commitments, which I had never seen before. The end result was a super thinly traded stock with lots of questions on go forward funding and why their PIPE buyers didn’t deliver.

I’ll pause here to remind readers that TMC is a super small, super illiquid stock, and the failure to deliver the PIPE raises all sorts of questions. So please remember nothing on this blog is investing advice, and I’ll disclose I bought a token amount of call options when I saw the filings I’m about to discuss.

Anyway, I tweeted this out, but yesterday the company filed two form 4s noting that insiders had bought ~$10m of stock, or ~2.3m shares. I discussed how curious insider buys can be in my links and ideas earlier this week, but it’s tough to read into insider buys as big as these TMC ones as anything other than very bullish.

But the more I looked at those buys, the more curious I got.

First, the size of those buys is pretty wild. Post redemptions, TMC had 2.7m shares of public free float. If those form 4s are to be believed, insiders just bought up ~85% of TMC’s free float insider in a day.

The last reported NASDAQ short interest I saw had 2.5m shares of TMC short. I’m sure that’s changed since (I’m writing this the afternoon of Friday, October 1, and the last short interest I see is September 15), but if that form 4 is to be believed suddenly the free float on TMC is under 500k shares. If there are any shares left short, this could get squeezy pretty quickly in the next day or two as panicked brokers / shorts realize there’s basically no borrow left in the stock (actually, forget borrow; it could get squeezy as panicked brokers / shorts realize there’s basically no stock left).

So, full disclosure, I bought a token amount of calls when I saw that form 4. If it’s accurate, things could get really weird from here given a super small free float remaining, the apparent massive insider buying, and that the stock has an options chain (making it very “meme-able”).

But the more I looked at it, the weirder that form 4 looked. I’ve screenshotted the form 4 below; take a look at the two things I’ve circled.

The top circle (the “A”) indicates the transaction was an acquisition. However, the bottom circle notes that the price represents the “average selling price of the common shares sold”. So that raises the question: did an insider just buy up almost all of the free float of TMC? Or did an insider just make a massive sale that basically doubled the free float, and then file a form 4 that said the sale was a buy?

Honestly, I don’t know. It’s hard for me to imagine an insider sold millions of stock in a company, effectively doubling the free float, and then accidentally put in the wrong code and indicated the sale was a buy. That feels like the type of thing that results in an investigation and resignations unless it’s immediately corrected (and, even then…..), and I’m finishing this article Saturday morning and there have still been no correction to that form 4, so it seems like it was a purchase. Plus, I went back through the company’s deal prospectus and it seems like the insider’s shares should still be subject to the company’s lock-up agreement (per p. 227, shareholders are subject to a six month lock; however, some on Twitter have suggested I am misinterpreting the lock-up; I think I’m right but just putting it out there for fairness / fully admitting I could be off). Tactically, having an insider sell a block now also wouldn’t be a great look for the company; remember, they are suing their PIPE buyer to get them to deliver on >$200m of funds that were promised to them in the SPAC deal. Those funds were set to come in at $10/share; for the company to sue asking for those funds while an insider is aggressively dumping shares at $5/share just a few weeks later is not a great look!

On the other hand, the skeptic in me is just finding it hard to believe that an insider would step up and buy basically all of TMC’s free float. And SOAC’s prospectus indicated Andrei (the insider who filed the form 4) owned ~43m shares, while the form 4 filed yesterday indicates he owns ~41.9m, so it seems like he reduced his stake at some point…

Anyway, bottom line: I don’t know what’s happening here. If insiders actually stepped up and bought $10m shares of stock and took out the majority of the free float, that’s an insanely bullish sign for TMC and I’d expect fireworks for the stock. If insiders are actually selling huge blocks of stock (despite their lock-ups!) and then filing form 4s that say they are buying, I’d expect some type of regulatory fines and a resignation at some point, and a lot of hard questions about how insiders are selling through a lock up.

But the TMC story after the PIPE failed to deliver was already one of the weirdest SPAC stories I’d seen. And it just keeps getting stranger and stranger with this form 4 drama.

I’ve got my popcorn out. I’m excited to see the next turn in the story!