TWNK

Publicly traded companies mentioned herein: Apollo Global Management LLC (APO), Gores Holdings Inc (GRSH)

Highlights

The presenter is long shares of Gores Holdings (GRSH; $10.73), which is a special purpose acquisition company (SPAC) with a deal to acquire sweet baked good (SBG) maker Hostess Brands (best known for its Twinkies). There is almost no risk to the deal and he expects it to close in October. Pro forma, GRSH/Hostess should be a $1.4 billion market cap company led by turnaround specialist and noted food industry expert Dean Metropoulos, who has personally invested millions in the company and transformed it into the “best in class” SBG company in the market. With a visible catalyst path that includes closure of the deal, increasing liquidity and a high probability of Street analysts initiating coverage of the company the presenter thinks it makes sense to establish a position in GRSH today (there are warrants available as well, but liquidity may be an issue for some investors). At a mid-teens multiple to EBITDA the stock can reasonably be expected to trade in the mid-$20s within 12-24 months and there is optionality around M&A longer-term.