I Think Nano Dimension Makes a Terrific Acquisition Candidate

Nano Dimension (NNDM) management hit the market with yet another offering yesterday. This time the company sold 39.1 million American Depositary Shares for $12.80 each, netting NNDM another $500 million. This shouldn't come as a shock since the company did have an open shelf offering. As a direct offering, NNDM had buyers lined up ready to take the shares. They didn't quite make it a month between closed offerings between. The $332.5 million from January 14th at $9.50 per share didn't close until January 19th. This one is slated to close on February 18th. 

My guess is you have a few institutional investors averaging up in these offerings. We're stair stepped. Looking backward from today through October 1, we can see a pattern: $12.80, $9.50, $7.50, $6, $5, $4, $3, and $2.30. I come up with around $1.49 billion raised since October 1. The grand total is roughly 198.45 million shares sold at an average of $7.50 per share.

I believe the $7.50 average provides a strong line in the sand. Honestly, I would bump that up to $10. After raising roughly $1.5 billion, NNDM's market cap will sit around $3.5 billion post-money from the current offering. While their inventory build-out plus research and development is fairly hefty, they have a strong cash pile on the balance sheet. I still think this makes a terrific acquisition candidate, especially with the influx of cash but I can see how some may hesitate to chase it higher with the constant barrage of offerings.

On the flip side, it has often held the offering levels. With that in mind, the $12.50 strike becomes a strong candidate for a put sale, or, in this case, the short leg of a bullish put spread. With the past levels holding strong post offering, it's a trend I'll play until we see a break. Below $10, I would get worried about a push to the $7.50 area. If anything, I think a break of $12.50 could push for a $10 test, but the stock would bounce quickly from that price. That's why I want the $10 level as my long strike for the put spread.

The Trade:

Sell to open March 19 $12.50 - $10 put spread at $1.04

Net Credit $104

Max Risk $146

Max Reward $104

Breakeven $11.46

Days until expiration: 30

At the time of publication, Timothy Collins was Short NNDM put spreads.