Bed Bath & Beyond Clinches Loan Deal; Matt Levine on AMC and TWTR; The 30-Year-Old Spending $1 Billion to Save Crypto; How Occidental Petroleum Captured Warren Buffett's Eye; Hedge-Fund Pioneer Julian Robertson Jr. Dies at 90

1) Bed Bath and Beyond's (BBBY) stock is ripping this morning (though only back to where it was on Friday) on this news: Bed Bath & Beyond Clinches Loan Deal. Excerpt:

Bed Bath & Beyond has found a financing source to shore up its liquidity as it tries to weather recent missteps, according to people familiar with the matter.

The company on Tuesday told prospective lenders that it has selected a lender to provide a loan following a marketing process conducted by JPMorgan Chase & Co., people familiar with the matter said.

A loan deal would provide liquidity and give vendors confidence they can continue to ship goods to Bed Bath & Beyond, which is fighting to correct missteps from an ill-fated push into private-label brands. The retailer had been seeking about $375 million to pad its cash levels and help pay down existing debt, The Wall Street Journal previously reported.

The size and terms of the final deal weren't immediately clear on Tuesday.

Pretty much any financing for this distressed retailer is probably good news for shareholders, but the devil is in the details – of which there are none. How much financing? Enough to allow the company to build sufficient inventory for the critical holiday season? What are the terms? I suspect they are onerous...

My take: Continue to avoid this stock at all costs, as a bankruptcy filing in the not-too-distant future is still the most likely outcome.

2) Another company facing bankruptcy is AMC Entertainment (AMC), which was thrown a lifeline because its stock inexplicably became a favorite among the clueless speculators on Reddit's WallStreetBets message board. In yesterday's missive, Bloomberg columnist Matt Levine had an insightful, hilarious analysis of how the company is exploiting the foolishness of naïve retail investors to try to save itself: AMC Goes APE. Excerpt:

AMC Entertainment is a huge meme stock and has, over the last couple of years, been particularly aggressive about selling stock into its meme rally. In June 2020, AMC had about 104 million shares of stock outstanding; now it has about 516 million. Roughly 80% of all AMC shares were issued in the last two years, partly out of late-2020 desperation (a pandemic is bad for movie theaters) but partly out of early-2021 opportunism (a meme-stock rally is great for movie theaters I guess?).

Retail investor enthusiasm got AMC out of some real financial difficulties. And then it kept going. In March it bought a gold mine? AMC, led by its meme-loving chief executive officer Adam Aron, has seized every opportunity provided by its legion of meme-stock retail investors to shore up its finances, pivot into new businesses and become sort of a meme-stock conglomerate.

My take: The implosion of meme stocks is bad news for AMC, which is why it's one of my top three stocks to avoid right now, along with Digital World Acquisition (DWAC) and GameStop (GME).

3) In yesterday's column, Levine also commented on the impact of the whistleblower's complaint against Twitter (TWTR) on Elon Musk's attempt to weasel out of the contract he signed to buy the company:

To be clear, Zatko's complaint doesn't agree with Musk's. The narrow issue in the Musk/Twitter dispute is whether Twitter has been lying in its securities filings when it says that it estimates that fewer than 5% of its "monetizable daily active users" are spam or bot accounts. And Zatko is pretty unambiguous that, no, Twitter's numbers are correct...

Musk's claim is that Twitter counts spam bots in its mDAU numbers. Zatko's complaint says, no, obviously Twitter doesn't do that – that's just a thing that Musk made up to get out of the deal – but the spam bots exist and are annoying. Twitter does a good job of excluding them from its count of monetizable users, he says, but not of getting rid of them entirely. That's not fraud; it's just a thing that annoys Zatko (and Musk).

The rest of the complaint is mostly like that too. The gist of it is that, when he worked there, Zatko felt like Twitter was disorganized and incompetent, and because Twitter is a really important platform with lots of users, that's bad. "Mudge Discovers Egregious Deficiencies, Negligence, Willful Ignorance, and Threats to National Security & Democracy" is one representative section header. Basically "Twitter was bad at running a website." Which I think a lot of people already believed?...

Even if these claims are true, and even if they are evidence of fraud or material adverse effect, they are not evidence of anything that Musk has been complaining about. Musk would have to, like, send Twitter a new termination letter saying "never mind about the bot stuff, now I'm terminating the deal because of the security vulnerability stuff." But he could do that, why not. He's not limited to the excuses he's already tried; if people keep finding him new excuses to get out of the deal, he can try those too. Maybe one will work.

My take: Musk's desperate shenanigans won't work, and he will be forced to buy Twitter for $54.20 a share.

4) Speaking of desperate shenanigans that I believe are doomed to fail, here's another example: The 30-Year-Old Spending $1 Billion to Save Crypto. Excerpt:

Crypto is ailing. Sam Bankman-Fried is betting a billion dollars he can fix it.

The chief executive of cryptocurrency exchange FTX Trading Ltd. has appointed himself the industry's savior – and crypto investors are closely watching his moves after months of market carnage. This year, he bailed out a troubled digital-currency lender and tried to stabilize another. He acquired crypto exchanges in Canada and Japan. He appeared in magazine ads opposite supermodel Gisele Bündchen in a bid to keep mainstream investors enthusiastic about crypto despite the downturn.

That kind of speed is routine for Mr. Bankman-Fried, a 30-year-old billionaire with a mop of curly hair who sleeps a few hours a night and toys with a fidget spinner during interviews. Last year, when regulatory scrutiny of crypto led Mr. Bankman-Fried to move FTX's headquarters from Hong Kong to the Bahamas, dozens of employees relocated to the island nation within about a month.

Mr. Bankman-Fried says his ultimate goal is to bring crypto to the masses. He wants to make FTX a household name and use the technology behind bitcoin to reinvent traditional finance, including the stock market and ordinary consumer payments.

He has a lot of work to do. More than a decade after bitcoin's birth, proponents still struggle to explain the value of digital currencies to a broad audience. Bitcoin has fallen nearly 70% from its November peak and the crash has erased $2 trillion of value from the crypto market, hurting millions of investors.

5) Readers, I'm begging you to ignore all this foolishness and listen to – and perhaps even invest alongside, by buying Berkshire Hathaway (BRK-B) – the greatest investor of all time, Warren Buffett.

Buffett and I are equally bullish on long-term oil prices and one company in particular: Occidental Petroleum (OXY).

Buffett has been buying shares aggressively since February for a number of reasons outlined in this Wall Street Journal article: How Occidental Petroleum Captured Warren Buffett's Eye. Berkshire now owns more than 20% of the company and is poised to buy even more: Berkshire Hathaway cleared to buy up to 50% of Occidental Petroleum.

I tend to agree with this WSJ column, however, that Buffett isn't likely to buy the entire company: Warren Buffett Not Expected to Bid for Control of Occidental Following Approval for Bigger Stake. Excerpt:

There are other reasons to doubt a Berkshire takeover of Occidental is imminent.

One of them is price, said David Kass, a professor of finance at the University of Maryland's Robert H. Smith School of Business.

So far, Berkshire has bought virtually all of its Occidental shares at a price in the range of $50 to $60, Mr. Kass said. The highest price Berkshire paid was $60.37 in July, according to filings.

Mr. Buffett is a well-known bargain-hunter, so it is difficult to imagine Berkshire rushing to buy more Occidental shares at the current price, Mr. Kass said. The shares are up 146% for the year, boosted by a rally in the price of oil, compared with an 11% decline for the S&P 500.

People familiar with deliberations at Occidental said the company's leadership believes Mr. Buffett might consider making an offer if oil prices fall, bringing down Occidental's stock price. If Mr. Buffett made an offer the company viewed as fair, a majority of the Occidental's board would likely approve presenting it to shareholders, one of the people said.

6) I was saddened to read this news yesterday: Hedge-Fund Pioneer Julian Robertson Jr. Dies at 90. Excerpt:

Julian H. Robertson Jr., a pioneering hedge-fund investor, died at the age of 90. For two decades, Mr. Robertson led one of Wall Street's largest and highest-profile funds, Tiger Management LLC, scoring average annual gains of about 25%. Mr. Robertson trained and backed a number of successful managers who became known as "Tiger Cubs."

I had the honor of meeting Julian on a handful of occasions. He spoke at my Value Investing Congress conference once, and we shared a passion for education reform, especially high-quality charter schools.

He was also an incredible philanthropist. According to the article, he "contributed about $2 billion to charity during his lifetime, according to his spokesman, including more than $250 million to fight poverty in New York City. He pledged to donate the bulk of his estate to charity."

To me, that's more noteworthy than his remarkable achievements as an investor and mentor...

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.