Tuesday morning, 8:46 Pacific, I sold every position I owned and put the entire book into Merlin Labs at $3.17.
Not trimmed. Not rebalanced. Sold. Every position closed inside a few minutes, including the one that had been more than half my book for three weeks and was working.
The book is up 20.8% on invested capital in 4 months. That is the only performance number in this update and it is the one that matters, because everything underneath it just changed.
What Left
Five came off green, and those five carried most of the capital.
The two largest winners, IQE and Rubrik, both closed a shade under +138%. IQE I had held since the substrate work in the spring. Rubrik I had not touched in months, which is usually the sign a position is doing its job.
LPKF closed +55%. AXT closed +36.5% on a position that was three weeks old and had been up as much as +43% the week before.
The reds were Ouster at -3.2%, Coda at -13.7%, AmpliTech at -19.6%, Blue Moon at -27.9% and Amprius at -32.6%. I am not going to dress those up. Ouster I added to on August 12, six days before I sold it, which is the one I would take back. AmpliTech and Amprius were small sleeves that never got the second leg I underwrote. Blue Moon I wrote four parts on and I still think the asset is real, which is a separate question from whether I should have been holding it into this.
Agility through the CCXI trust closed at +18.9%. That name I had already traded once in early July and closed. I went back into it small after the August book update and closed it again on Tuesday with everything else. Two round trips, both green, neither large.
What Is Left
One position.
I have been publishing on Merlin since April. Thirteen parts. I have been wrong on pieces of it in public and corrected it in public. What changed Tuesday was not the thesis. The thesis has been the same since Part 1. What changed was the price against the thesis.
The stock printed $3.17 that morning. That was the low of the day and the lowest the name has traded since the de-SPAC. On the other side of that print sits roughly $183 million of cash, no debt, a company that cleared Stage of Involvement 3 with the New Zealand regulator, an aircraft that landed itself at Oshkosh in front of a crowd, and a sole-prime position on a $105 million IDIQ vehicle.
I did not want a 15% weight in that. I wanted the whole thing.
The reasoning is uncomfortable and I want to be direct about it. I had a book of ten names where nine of them were, at best, good. One of them was a situation. When you find a situation, the correct response is not to own a tenth of it alongside nine good ideas. Diversification is what you do when you do not know which one is the situation. I know which one it is.
That is either the best decision I have made or the one I will be writing about for a year. There is no version where it is neither.
The Tape Since
Three days is not a verdict. It is worth showing anyway because it is the only evidence that exists yet.
Merlin is up 6.3% from the exit print. Eight of the names I sold are lower than where I sold them, including AXT, which is down 13.6% in three sessions and had been the largest thing I owned. IQE gave back 15%. Ouster gave back 14%.
Both legs are working so far. Ask me in November.
What I Am Watching
The position is the whole book, so the watch list collapses into one list.
The task order. Remaining performance obligations at June 30 were $593 thousand against a $105 million ceiling. That gap is the entire near-term question. Ceiling is not revenue. What I need to see is obligated funding moving against the vehicle. Management told me directly that the task-order announcement is the event to watch and that it arrives bundled with the integration plan and the contract vehicle.
The board. The public job board has contracted from 30 requisitions to 23 since August 1, at the same time as intelligence that a new director-level hire is chartered to fill 41 to 43 technical roles. Those two facts do not sit together. A board that jumps from 23 toward 40 is the ramp signal. A board that keeps shrinking is something else.
September supply. There is a lock-up step in September and a conversion floor at $5.00. Below that floor the ratchet math gets worse for common holders. That is the single biggest reason this position could be right on the business and still hurt for another two quarters.
Cash. $183.5 million against roughly $25 million a quarter of operating burn is about seven quarters. The burn doubled year over year. The next raise happens either from strength or from the calendar, and which one it is tells you a great deal.
The Rules Have Not Changed
Everything I sold, I will keep covering. AXT, Blue Moon, IQE, LPKF, all of it. Coverage is not ownership and it never was. If one of them sets up again I will say so and I will say when I bought.
I will publish every mark on this position, up or down, on the same cadence I always have. A concentrated book is only defensible if it is a visible one.
Nothing here is advice. This is what I did with my own money and I would not recommend anybody copy the sizing.
The Merlin management full call tape lands separately this week. The AmpliTech post-mortem is already up.
good luck mate
You have gone nuts. But sometimes nutty people are right so fingers cross