On the occasion of SpaceX's IPO... A classic from Dan Ferris... When the ducks quack, feed 'em... How one 'meme stock' did it... What a long-term investor can do... Don't miss Whitney Tilson's urgent briefing...
Editor's note: Regular Friday Digest essayist Dan Ferris is off today, but we still have a helping of his sage wisdom to share. Today's SpaceX IPO got me (Corey McLaughlin) thinking about a classic essay from Dan, originally published in 2021.
You see, SpaceX (SPCX) went public this morning at an almost $2 trillion valuation – or roughly 100 times the company's sales – an unjustifiable number, as we've explained in recent days...
Nevertheless, as SpaceX sought to raise $75 billion in the public markets in the largest IPO in history, the IPO reportedly drew orders totaling more than $350 billion. So it was oversubscribed almost 5 times over.
Not only that, but SpaceX also offered a chunk of "pre-IPO" shares to retail investors that rank among the largest ever for an IPO of this size, and brokerages obliged, with many lowering the typical minimum account balance to participate.
It was reported yesterday that retail investors made more than $100 billion of orders alone for the SpaceX IPO. Meanwhile, the biggest U.S. banks underwriting the public debut took home around $500 million in fees.
SpaceX priced shares at $135 and they closed today nearly 20% higher at $161, making SpaceX the sixth-most valuable U.S. company by market cap at $2.1 trillion.
But as Dan explains in this essay, slightly edited for timeliness, it's often better for long-term investors to take the other side of this type of trade – "when crazed speculators clamor loudly – like ducks."
When the markets get really frothy, you'll often hear folks reciting an old Wall Street adage...
When the ducks quack, feed 'em.
It's a bit of contrarian advice... Essentially, it's counseling investors to take the other side of a trade when crazed speculators clamor loudly – like ducks – for a particular security, pushing its valuation to absurd extremes.
This adage might sound familiar to loyal Digest readers...
I (Dan Ferris) mentioned it way back in September 2019, when I quoted money manager Josh Brown. He alluded to the saying while warning investors that Wall Street almost got away with selling them office-space-leasing company WeWork for $50 billion...
Ritholtz Wealth Management CEO and CNBC regular Josh Brown posted a video about [co-founder Adam] Neumann's ouster and the failure of WeWork's IPO on Twitter. He also wrote...
Wall Street was THISCLOSE to selling you #WeWork at $50 billion. Stop quacking like a duck and they'll stop throwing breadcrumbs at you.
Investors will never stop quacking like ducks and Wall Street will never stop trying to make money by shoving toxic breadcrumbs down their throats... though maybe they're more like geese, with Wall Street forcibly fattening them up to make foie gras.
Whichever waterfowl you like, Brown nailed his point...
It seems like everywhere you look on Wall Street, some rich dude is taking investors for a ride. And they're quacking like crazy, practically begging him to do it.
By taking the other side of notable quacking-duck trades in recent decades, you would've been out of Internet stocks in 1999 and early 2000... banks and mortgages in 2006 and 2007... and "meme stocks" like movie-theater chain AMC Entertainment (AMC) today.
AMC shareholders might be the most well-fed ducks in market history...
Sure, you can make a case for video-game retailer GameStop (GME) and all the other Great Meme Stocks of 2021. But these days, AMC is feeding the quacking ducks like no one else...
That's true both figuratively and literally.
You see, AMC's management team, aided by a hedge fund, fed its shareholders three times during the week of May 31, 2021, twice by selling them more than $1 billion in new equity offerings and once by... well... giving them free duck food.
The first feeding came early on June 1, when AMC announced that it had sold $230 million of new shares to a single investor – hedge fund Mudrick Capital, which specializes in distressed investing.
It's a bit unusual for a company to issue that much new equity to a single shareholder, but it's far from the most unusual thing to happen in recent years. And Mudrick is no duck. It fed them the ducks that week, and it wasn't the first time it has done so...
Mudrick lent the company $100 million in 2020 to stave off bankruptcy, as COVID-19 pandemic lockdowns shuttered its movie theaters all over the world. And then, earlier in 2021, the hedge fund swapped AMC bonds for new shares and immediately sold them.
So it should've been no surprise at all when Mudrick sold the AMC shares it bought on June 1... on the same day that AMC announced that it had sold them to Mudrick.
That's right... Mudrick once again flipped the AMC shares for a quick profit. All told, according to the Financial Times, [as of 2021], Mudrick has made $200 million flipping AMC shares.
And Mudrick isn't the only big shareholder who has fed all the ducks in recent months...
Chinese conglomerate Dalian Wanda, AMC's longtime controlling shareholder, sold nearly all of its 7% stake in May 2021. Private-equity firm Silver Lake also swapped AMC debt for equity and sold out in January 2021 for a $113 million profit.
To make matters even worse... when Mudrick dumped its AMC shares, somebody in the know told news service Bloomberg that the hedge fund concluded that the stock was overvalued.
You might think a transaction like that would seem cynical to everyday investors... and that they would respond by dumping the stock en masse. But that's far from what happened throughout the next day, thanks in large part to what came next...
The second feeding for AMC shareholders came June 2 – and it was actual duck food this time...
In a press release, AMC unveiled "AMC Investor Connect." And it described the program as "an innovative, proactive communication initiative that will put AMC in direct communication with its extraordinary base of enthusiastic and passionate individual shareholders."
Shareholders who sign up for AMC Investor Connect "will receive an initial offer of a free large popcorn when attending a movie" at any AMC-owned theater [during the summer of 2021].
Duck food.
The company is handing out plenty of it for all those "enthusiastic and passionate" ducks – er, I mean "individual shareholders" – who have bid shares up roughly 2,300% since the start 2021.
And free popcorn is just the beginning. According to AMC's press release, retail shareholders will also receive...
- Shareholder-exclusive promotions, including free or discounted items, and invitations to special screenings
- Communications directly from CEO and president of AMC Theatres, Adam Aron
- Other interesting information about AMC and its place in the movie ecosystem
That all sounds super interesting... I mean, direct communication from the head of the company? AMC's place in the "movie ecosystem"? That beats free popcorn any day, right?
These ducks might be a bunch of noisy know-nothings, but when they all take flight together, don't get in the way...
Thanks to the horde of retail investors, AMC's stock soared to a new all-time high on June 2. The stock closed at $32.04 per share on June 1. A day later, it was up 95% to $62.55 per share. And it went up another nearly 9% in after-hours trading.
Just take a look at this one-year chart of AMC. As you can see, the recent action blows away what happened back in late January during the previous major feeding of AMC ducks...
Not content with just driving AMC's stock higher, these retail investors also took aim at Mudrick's special purpose acquisition company in a revenge attempt... Mudrick Capital Acquisition II (MUDS) closed down 15% on June 1 after Bloomberg's story broke.
Trading in AMC was so frenzied that day, Nasdaq halted trading in the stock four times.
I guess the ducks didn't learn their lesson after all.
Apparently free popcorn means the value of the business almost doubled in a day...
Let's just ignore that the movie industry still faces the same headwinds of pandemic-related restrictions in many places. And we'll also pretend that the secular move toward in-home movie streaming and other video-entertainment consumption isn't happening.
Overall movie-theater attendance has been declining for more than a decade... According to a December 2020 report from research firm Deloitte, the average number of movie tickets bought by U.S. moviegoers fell from 4.2 in 2009 to 3.4 in 2019. And that's before the COVID-19 pandemic hit and forever changed entertainment-consumption habits.
I have to hand it to AMC's management team, though... It's making hay while the sun shines by doing exactly what it should do – selling as many shares as possible while they're egregiously overvalued, and paying peanuts... or rather popcorn... to do it.
That leads us to AMC announcing its third (and largest) duck feeding of the week...
The company filed with the U.S. Securities and Exchange Commission ("SEC") on June 3 to sell up to 11.55 million new shares at market prices.
At June 2's closing price, proceeds from the sale would've topped $722 million. But the stock fell so much on that day that, once again, trading was halted... It fell as much as 40% in frenzied trading throughout the day and recovered slightly to finish down 18%.
It'll be interesting to see how much AMC actually takes in once the sale concludes.
In the meantime, who knew ducks were such finicky eaters?
We all should've known, though...
With the big players like Dalian Wanda, Silver Lake, and Mudrick exiting the stock, the meme crowd has been in charge for some time. When AMC announced the free popcorn, it noted that 3.2 million individual shareholders owned 80% of the stock (as of March 11, 2021).
It's anybody's guess who will hang on long enough to enjoy the free popcorn this summer.
But if investors listen to AMC management's advice, they won't even buy the stock in the first place...
For all of the company's praise of its shareholders' enthusiasm and passion, AMC management doesn't think they're very smart to own the stock. In the June 3 SEC filing, complete with bolding for emphasis, it offered investors the following warning...
We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last. Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.
Here's a pretty simple guideline to follow if you're just starting out as an investor...
When the company's management team tells you it's selling new shares but that you shouldn't buy them unless you're ready to "incur the risk of losing all or a substantial portion of your investment"... that current market prices are "unrelated to our underlying business"... and that it doesn't know "how long these dynamics will last"...
Maybe you should at least entertain the idea of believing them!
But the ducks are still assigning the company an absurd valuation.
Berna Barshay, an editor at our former corporate affiliate Empire Financial Research, detailed just how absurd the valuation of AMC is in her Empire Financial Daily e-letter on June 2...
Back at the end of 2019, AMC's enterprise value ("EV") – the sum of its market cap and all its outstanding debt net of any cash on its balance sheets – stood at just over $5 billion. [On June 2], with the stock trading around $62 per share, the EV stands at almost $36 billion.
Does anyone really think that the pandemic made AMC worth almost 7 times more than it was worth before?
What has happened since then? Well, the exclusive theatrical window blew up, theaters were closed, and AMC burned $1.6 billion of cash in five quarters. Clearly a recipe for EV going up 575%. And just for comparison's sake... over the same period, Internet giant Amazon's (AMZN) EV went up just 75%. Pandemic winner poster children like video chat service Zoom (ZM) and home fitness company Peloton (PTON) only saw their EVs rise 350% and 100%, respectively, over the same time period.
As Berna noted, the EV of $36 billion means investors believe AMC is more highly valued than companies with much larger and more dominant businesses. She cited news and sports titan Fox (FOXA) and satellite radio operator Sirius XM (SIRI) as examples.
More from Berna...
Put in context yet one more way... AMC is trading right now at a multiple of EV to earnings before interest, taxes, depreciation, and amortization ("EBITDA") of around 61 times, using 2019 EBITDA, which was unaffected by COVID-19.
On this basis, Disney is trading at 24 times. Netflix (NFLX) is trading at 34 times.
Moving away from media to some other widely held favorites, you can own Amazon right now at an EV/2021 EBITDA of 21 times and Apple (AAPL) at 18 times. Does anyone truly believe that AMC deserves 3 times the multiple of two of the biggest and best-run companies in the entire world, both of which are expected to grow revenues by 30% this year?
No wonder my colleague Whitney Tilson recently called a short-term top in AMC and nine other stocks in his "Short Squeeze Bubble Basket." The full list totals 25 stocks. As Whitney wrote...
Mark my words: these stocks will fall 25% within a month (probably much sooner), 50% within three months, and 75% within a year. I will be tracking them and will report back to you periodically.
Whitney is pretty good at this type of stuff, too...
I remember him calling the top in bitcoin within hours back in December 2017. He has also made other similarly accurate top calls over the years... I give Whitney's and his then-partner Glenn Tongue's work on financial stocks a lot of credit for turning me bearish in early 2008.
The fact that AMC's stock doubled the day after Whitney's bold prediction might make it look like he's wrong. But as I hope you've learned by this point... a loudly quacking group of ducks is a classic sign of an impending meltdown. I bet he winds up nailing this one, too.
[Editor's note: Whitney – and Dan – did. AMC plunged from a split-adjusted all-time closing high of around $600 per share on June 2, 2021 to a present-day price of around $2.30, a more than 99% loss.]
Lessons from Jeremy Grantham...
Value-investing legend Jeremy Grantham and his investment firm, GMO, are well known as students of bubbles, though they have a history of acting early...
For example, GMO moved out of Japanese stocks in 1987, and it underperformed painfully for three years before the bubble eventually popped.
Likewise, the firm sold stocks in 1997 when the S&P 500 Index passed its 1929 peak valuation of 21 times earnings. Then, as Grantham recalled in a January 2021 letter to investors...
[We] watched in horror as the market went to 35 [times] on rising earnings. We lost half our Asset Allocation book of business, but in the ensuing decline, we much more than made up our losses.
But Grantham's insights have added at least some value for investors. As he also noted...
I came fairly close to calling one bull market peak in 2008 and nailed a bear market low in early 2009.
The S&P 500 actually topped out in October 2007, but if you didn't turn bearish until 2008, you still avoided the worst damage. The next bull market started in March 2009... There hasn't been a better time to turn bullish in my career.
You could argue that all this talk about quacking ducks not getting enough of the popular stocks, and investors like Whitney and Grantham being bearish enough in varying degrees to call tops in places where they see bubbles, is a bit academic.
You could also argue – and I would agree with you – that there's no need to time the top of any group of stocks unless you're interested in a risky, speculative bet against them.
But in the end, as long as you avoid those stocks, you can watch from the sidelines while the ducks' favorite foods are blown out of the sky one by one... It's going to happen.
And of course, if you're a long-term investor, you can simply follow my usual advice...
Focus on owning good businesses and protecting your wealth. And hold a well-diversified portfolio, including the same four core elements I've talked about for a couple of years...
- Stocks and bonds
- Plenty of cash
- Gold and silver
- A little bitcoin
That's just a basic skeleton...
Maybe you don't like bitcoin, so you don't want to include it. Maybe you would rather put your money into land, art, or some other time-honored store of value. That's OK, too.
The point is... an adequately diversified portfolio focused on capital appreciation and wealth preservation prepares you for great businesses to keep generating good returns (stocks and bonds)... for deflation and bear markets to make stocks cheaper, providing a new buying opportunity (plenty of cash)... for inflation to make life difficult for businesses and cash holders (gold and silver)... and for a potentially massive disruption in the structure of the financial industry (bitcoin).
In other words, as I've said before, it prepares you for a wide range of potential outcomes.
Besides being adequately diversified, I'll leave you with one other obvious bit of advice...
If you catch yourself quacking after stocks like this, stop immediately and consider taking the other side of the trade. It's better to sell and get away from whatever the ducks are quacking for than to quack alongside them.
It's better to feed the ducks than be one.
Editor's note: The ducks were quacking today as SpaceX made its public debut... But as Dan wrote in this essay, it's wise to consider the other side of a trade like this.
Whitney agrees, too...
Last week, he wrote about why you should protect your portfolio from SpaceX (and OpenAI). And in just a few days, he's sitting down on camera to explain much more in a new free briefing.
As Whitney explained in his free daily e-letter yesterday...
If you have an investment account or retirement fund, you may have unwittingly opted in to receive those SpaceX shares – and it could spell disaster for your savings. It all has to do with a financial rule going into effect on July 6.
That's why I've put together a special presentation to share how you can protect your portfolio... and the one important move to make so you aren't left holding the bag.
Whitney is talking about one of the biggest changes to how companies go public that we've seen in a generation. More than 100 million Americans may soon become "forced" buyers of SpaceX shares, and he wants you to know exactly what's about to happen and what to do about it.
To reserve your spot for Whitney's free briefing on Tuesday, June 16 at 1 p.m. Eastern time, click here now.
New 52-week highs (as of 6/11/26): Applied Materials (AMAT), ASML (ASML), Leonardo DRS (DRS), Exelixis (EXEL), Eli Lilly (LLY), Invesco High Yield Equity Dividend Achievers Fund (PEY), Public Storage (PSA), Ryder System (R), and Twist Bioscience (TWST).
In today's mailbag, more thoughts on mega-cap IPOs... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"I've heard it said that bull markets end when there's no more money. That makes me wonder what'll happen after the coming giant IPOs are bought." – Subscriber Neil B.
Good investing,
Dan Ferris
Medford, Oregon
June 12, 2026
