Recommending Meta on Bloomberg TV; DWAC's market cap is more than 5 times higher than investors think; GameStop Investors Still Await Riches From Epic Short Squeeze; Pandemic update
1) I appeared on Bloomberg TV on Friday afternoon, talking about why I liked Meta Platforms (FB) and was avoiding Digital World Acquisition (DWAC), GameStop (GME), and AMC Entertainment (AMC). You can watch the five-minute video here.
2) Speaking of DWAC, this morning it spiked to nearly $95, up more than 12%, on no news. The higher it goes, the further it will fall...
The single biggest mistake investors (I use that term loosely here) are making is that they have the share count wrong – by a lot!
As I write this, with the stock around $95, Yahoo Finance and other sites show that the company has a $3.5 billion market cap, based on 37.2 million shares outstanding.
But that's just the DWAC shares. To this figure, one must add the shares from the business the SPAC is combining with, Trump Media and Technology Group ("TMTG"), plus the shares that will be issued via the $1 billion PIPE. Here's the math, as posted by someone on ValueInvestorsClub:
Tons of people in the stock (i.e. the retail people) still think that its outstanding share is only about 37M (see Reddit and Twitter comments). That's DWAC's outstanding shares. Then, there's TMTG's outstanding shares which is about 88M. Then, there's PIPE investors' (ARC Global Investments II and affiliates) 100M shares (refer to https://www.bamsec.com/filing/119312521348598?cik=1849635).
The total pro-forma share count I've seen in two places is 193.4 million – more than 5 times higher than what investors think!
Thus, at a price of $95, that gives DWAC a market cap of $18.2 billion. For perspective, Twitter (TWTR), which has been around for 16 years and has 211 million daily average users, has a market cap just under $30 billion.
There are only two possible outcomes here: the deal goes through, or it doesn't.
I think there's a 75% chance that the SEC blocks the deal, in which case the stock will immediately collapse to roughly $10, the amount of cash DWAC has in trust.
In the 25% chance that the deal goes through, the share count will increase by more than 5 times overnight, PIPE investors will sell every share they bought as fast as they can, and, as the stock starts to crash, retail investors will panic and add to the selling.
It's going to be a bloodbath either way...
P.S. Here's another article from a few weeks ago outlining what's going to happen: How to Lose Money: Buy Digital World Acquisition Corp.
3) And speaking of GameStop...
Given how widespread bizarre conspiracy theories are, I suppose it shouldn't be surprising that there are plenty in the investing world as well. These poor, misguided folks waiting for the "MOASS" (mother of all short squeezes) in busted meme stocks like GameStink and AMC are going to lose their shirts... GameStop Investors Still Await Riches From Epic Short Squeeze. Excerpt:
Ben Wehrman clocks into his job as a Tesla (TSLA) salesman five days a week. His real work begins when he clocks out at night.
The 27-year-old Californian often spends his evenings, coffee in hand, researching a topic that has captivated hordes of individual investors online: an alleged Wall Street conspiracy to suppress the price of GameStop shares.
In December, after pulling several all-nighters, Mr. Wehrman published a nearly 16,000-word thesis on his blog. "The true depth of this collusion hasn't made it into the public eye yet," he wrote.
The theory: short-selling hedge funds are covering up a vast volume of bets against the stock. Believers say if individual investors continue to buy and hold GameStop, the short sellers' wagers will eventually blow up and the small-time players who held the stock will strike it rich.
4) I sent a 24-page update on the pandemic to my coronavirus e-mail list on Saturday (to be added to it, simply send a blank email to: cv-subscribe@mailer.kasecapital.com). You can read the entire e-mail here.
Here are some excerpts:
The pandemic news continues to be excellent. Exactly as I predicted, cases in the U.S. peaked in mid-January and are in steep decline, with hospitalizations following a week or so later. Deaths have risen more and for longer than I'd hoped for (more on this below), but I think they've peaked and will also start to decline quickly...
The numbers in NYC and London are even better – see charts here and here – despite gloom and doom stories like this one: One Day in the 'Parallel Universe' of a London I.C.U. Here's a more upbeat one from today's NYT: How New York City's Hospitals Withstood the Omicron Surge...
This front page story in today's NYT (as well as the incredibly strong unemployment report that came out yesterday) also show that Americans realize that the pandemic is over and are moving forward with their lives: U.S. Covid Death Toll Surpasses 900,000 as Omicron's Spread Slows...
The U.S. just passed a grim milestone yesterday: 900,000 Americans dead from COVID. And, contrary to the nonsense circulating out there that these are mostly old and/or obese people who were going to die anyway, the actual death toll from the pandemic is even higher, as this in-depth WSJ article notes: Excess Death Toll Set to Hit a Million.
This death toll is even more horrifying because it's so much higher than other developed countries, as this front-page story in the NYT a few days ago notes: U.S. Has Far Higher Covid Death Rate Than Other Wealthy Countries...
Three professors recently published a 69-page study, A LITERATURE REVIEW AND META-ANALYSIS OF THE EFFECTS OF LOCKDOWNS ON COVID-19 MORTALITY, in the journal Studies in Applied Economics. They concluded that lockdowns had "little to no effect" on saving lives during the pandemic and "should be rejected out of hand as a pandemic policy... While this meta-analysis concludes that lockdowns have had little to no public health effects, they have imposed enormous economic and social costs where they have been adopted." Here's a City Journal article about it: No Benefit, Many Costs.
I think this study is largely bogus, though it does raise valid points about a tricky and nuanced issue.
In the rest of my e-mail, I cover:
- Pandemic dashboard
- Democrats Search for New Message on Virus
- Dr. Kevin Maki's comments
- Why does the U.S. have a far higher COVID death rate than other wealthy countries?
- The unvaxxed are 97 TIMES more likely to die from COVID
- Anti-vaxxers making $2.5 million per year
- Study on lockdowns
- Denmark Ending All COVID Restrictions, Back to Normal
- Letter one of my readers sent to Worcester Polytechnic Institute
- Karma is such a b*tch
- Q&A with Dr. Maki
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.