GMHIW! With the recent SPAC boom, many markets have introduced SPAC-related presentations to teach about these new financial instruments. One such example is GMHIW, representing the public warrants of Gores Metropoulos, Inc. GMHIW warrants served a pivotal role during their transformation from a blank-check SPAC to a fully functioning public entity after merging with Luminar Technologies, a sophisticated LiDAR provider for autonomous driving.
To analyze GMHIW effectively, it is necessary to discuss the SPAC merge process and describe, in depth, what warrants are, and their functions.
What Was GMHIW?
GMHIW denotes the public warrants issued by Gores Metropoulos, Inc. prior to the merger. In SPAC structures, warrants are issued to go together with units and shares, to entice investors.
The structure looked like this:
- GMHI = Common shares of the SPAC
- GMHIU = Units (bundle of share + warrant)
- GMHIW = Public warrants
These warrants allowed investors to buy more shares within a set timeframe at a predetermined price (usually $11.50 per share) and allowed the warrant holder to gain a profit if, after the time frame, the shares of the merged company traded at a much higher price.
With GMHIW, investors had a leveraged exposure to an instrument that, at the time, did not exist. The warrants were not tied to an operating business, but to a future business that Gores Metropoulos would acquire.
SPAC Structure Behind GMHIW
As a starting point, a SPAC (Special Purpose Acquisition Company), is a process permitting a company to raise capital via a traditional IPO and merge with an existing private company at a later date.
- Gores Metropoulos followed this system.
- It had no active commercial operation upon IPO
- It public investor-based capital raised
- It placed those raised funds into a trust account
- It sought and was able to merge with a private company
The SPAC was sponsored by investment professionals; therefore, it was assumed the management team would find a viable acquisition candidate. Investors were awarded GMHIW type warrants with the potential upside if the merger was successful.
During the SPAC boom of 2020, investors had a tendency to purchase warrants aggressively because they provided an opportunity to invest in high growth companies prior to the merger.
Merger with Luminar Technologies
In 2020 August, Gores Metropoulos was able to announce it would merge with Luminar Technologies, a company specializing in (LiDAR) (Light Detection and Ranging) systems for self-driving vehicles.
The transaction included:
- Approximate valuation of $3.4 billion
- In excess of $400 million in the SPAC trust
- funds followed by interest due to growth in the deal autonomous vehicle space
- Luminars tech was viewed as necessary for developing fully autonomous driving and thus the public
The merger was completed in December 2020 and the new combined entity was listed under the new ticker:
- LAZR (Luminar Technologies)
This was the transition of GMHI into a public company and Luminar from a private entity.
What Happened to GMHIW After the Merger?
GMHIW, after the merger, did not cease operation, but underwent a structural change.
- GMHIW is no longer trading under the SPAC ticker.
- GMHIW is now trading as Luminar warrants (LAZRW)
- The company GMHIW was associated with has changed from Gores Metropoulos to Luminar Technologies
Essentially, this is an outcome of a SPAC merger. The warrants follow the business, not the SPAC.
The fundamental changes may not have altered any of the terms.
- The strike price remains the same at approximately $11.50.
- The expiration remains the same.
- The terms of the conversion remains unchanged.
The value of the warrants is now reliant on Luminar’s performance in the autopilot car industry.
How GMHIW-Style Warrants Actually Work
GMHIW warrants work like SPAC warrants. It is, in essence, a long call option.
- The value will stem from three sources.
- Warrant value will appreciate due to the rise in tx kets LAZR$.
- Due time value with the merger hinge warrants (which extends the time to the merger) significantly.
When the market is volatile.
- The downside risk is just as daunting.
- If the strike price is not reached, the warrants may be rendered worthless.
- The warrants may be called.
The combination of factors makes them desirable for short term traders, but risky for long term conservative investors.
Market Reaction and Investor Interest
After Luminar started selling its stocks to the public, the market was driven by the autonomous driving prospect, which spurned interest in the GMHIW warrants and the SPAC market at large during the early trading period.
As with many SPAC transactions from that time, the degree of performance became reliant on:
- Revenue
- Adoption of the accompanying technologies
- Collaborations with automotive manufacturers
- Overall investor sentiment towards Electric Vehicles (EVs) and autonomous technologies.
As a result, stock price (LAZR) and the newly exchanged warrants (LAZRW) became extremely volatile.
Why GMHIW Matters for Investors
This example will be a great reference point because it illustrates the transformation of SPAC instruments. Most new buyers during the SPAC frenzy were oblivious to the fact that,
- Warrants are not perpetual physical assets
- They constitute a merger and, therefore, surrender to the merger.
- They are, ultimately, a stake in the velocity of the merged company
This example will also be a great reference point because it illustrates that investing in SPACs requires a holistic understanding of its architecture, conversion processes, and the accompanying time value and risk associated with the investment more than anything else.
Frequently Asked Questions (Q/A)
Q1: So what is GMHIW?
A: GMHIW is the abbreviation for “Gores Metropoulos, Inc. Public Warrants” in the Nasdaq stock exchange, enabling investors to purchase shares at a pre-determined price.
Q2: What’s the fate of GMHIW after it merged with Luminar?
A: It became Luminar Technologies warrants (LAZRW) post-merger when the merger was officially completed in December 2020.
Q3: Are GMHIW type SPAC warrants stock?
A: No, GMHIW type SPAC warrants are not stock because warrants are, in essence, securities that provide the option to purchase stock; therefore, they do not represent ownership in the company whatsoever.
Q4: What’s the motivation behind investing in SPAC warrants?
A: They are, from a speculative perspective, designed to offer a considerable upside in the form of predicted growth in the stock.
Q5: Who is now associated with the legacy of GMHIW?
A: Luminar Technologies (LAZR), a company developing LiDAR for autonomous vehicles, is now associated with GMHIW’s legacy.
Closing Remarks
While GMHIW is merely a historical ticker symbol, it encapsulates an entire period of speculation-driven market SPACs and financial instruments GMHIW as a warrant was initially linked to Gores Metropoulos but its necessary value post-merger was a financial conduit to Luminar Technologies . Many investors realized during this fusion process the complexity and opportunities of the SPAC investing ecosystem, where the evolving identity of an asset is unpredictable until the deal is consummated. Downstream GMHIW/Luminar warrants illustrates the necessity of tracking the minor details of corporate actions as the absence of such tracking leads to a misperception of risk, value, and opportunity in the long-term. GMHIW in this regard serves as a reminder that in today’s market, one has to focus both on the corporate structure as much as the business.
