Why Are Hedge Funds Gathering Behind Quartet Merger Corporation?

Sometimes, making money is the only goal for a company and the Quartet Merger Corporation (NASDAQ:QTETU) is one of those. The firm intends to enter into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization, or other similar business combination with one or more businesses or entities. And among the first entities to show support when going public on November 1^st was Davidson Kempner Partners.

The transaction is important since Quartet Merger Corporation entered the securities market on November 1^st, with an IPO of 8.4 million shares at $10 each. The most important purchase was completed by North Pole Capital Master Fund, a hedge fund launched and managed by Polar Securities Inc. On November 11th, the Canadian-based hedge fund manager filed with the SEC a 13G form to disclose the purchase of 1,600,000 shares, representing a total of 12.62% of Quartet Merger Corporation.

North Pole Capital Master Fund’s purchase was accompanied by two additional hedge funds: Davidson Kempner Partners, and Bulldog Investors. The first fund acquired a total of 810,000 shares, while the second purchased 700,000 shares, corresponding to 7.13% and 6.34% stake on the company correspondingly.

So far, Quartet Merger Corporation has raised $85,645,000, or approximately $10.20 per share sold during opening day. However, those in possession of the shares sold are not free to do as they please with their stake in their business. According to the 8K form submitted to the SEC, the purchasers have agreed not to transfer, assign or sell any of the Private Placement Units (except to certain permitted transferees) until the completion of the company’s initial business combination.

Another business with a stake in the firm is EarlyBirdCapital Inc., the underwriter of the initial public offering, who exercised an option to purchase an additional 1,260,000 shares. The option was completed on November 5^th. Another 542,500 shares were sold to private parties, with 500,000 being purchased by the initial company shareholders, and the remaining 42,500 shares went to EarlyBirdCapital Inc.’s designees.

Disclosure: none