Special Purchase Acquisition Companies (SPACs) almost always come packaged with warrants, but a select few come with rights. It used to be an extra enticer to get investors on board but has largely fallen out of vogue. At the time the SPAC gets converted to its target ticker, the rights are changed into full shares based on the multiplier the management team has defined. Like warrants, rights expire worthless if the deal doesn’t close so they carry a degree of risk. For KBLMR, you need 10 rights to get 1 share on the date of deSPACing. If we multiple today’s close of KBLMR by 10, a glaring discrepancy becomes readily apparent.

Price per share of KBLMR is $.20

$.20 * 10 = $2.00

The current price per share of KBLM is $10.90

$10.90 – $2.00 = $8.90

That is $8.90 of unlocked value. Put another way, that is a 5.5 times premium on your investment. In what world does this make sense?

While the team of KBL Merger Corp IV is pretty distinguished, they are having the damnest time getting this sucker over the finish line. They hold the dubious distinction of being the oldest active SPAC, launching way back in June 1, 2017. Those who know traditional SPAC terms will be keen to point out that they are officially past the two year window required to get this deal done. Well they got the shareholders to extend and even managed to successfully fight a NASDAQ delisting last summer. Nothing inspires confidence like the very real possibility of getting downgraded to pink sheets.

It is a positive that KBLM fought on instead of admitting defeat and folding up shop. They secured their acquisition target, 180 Life Sciences, on July 26 and added bridge financing the month before. The company shoots out a press release weekly talking about the great things 180 Life Sciences is doing. Tucked within all of them is a note saying the deal will be closing in Q4.

November 9 is the official deadline. It could get extended again furthering the agony of shareholders. Alternatively, the deal could close, and the open market may decide 180 Life Science isn’t worth $10.90. It may freefall like many lackluster SPACs before it. Thankfully, there is a lot of cushion here if can’t hold current levels. There is a good chance that in five weeks, we’ll know if this was the arbitrage opportunity of the year, or the most colossal waste of money ever.

The payoff is tantalizing, but a sizable risk hangs heavily over this deal. Proceed with caution.

Disclosure: I/we have a position in KBL Merger Rights. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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