Behind the Lordstown Debacle; Enrique Abeyta on opportunities in the SPAC sector; Virgin Galactic cratering this week; Turks and Kurds; The magnificent Uzbek city of Samarkand
1) This story in yesterday's New York Times underscores the perils of investing in the special purpose acquisition company ("SPAC") sector: Behind the Lordstown Debacle, the Hand of a Wall Street Dealmaker. Excerpt:
Lordstown (RIDE) went public in October via a merger with Mr. Hamamoto's special purpose acquisition company, DiamondPeak Holdings. A Wall Street innovation, SPACs are all the rage, having raised more than $190 billion from investors since the start of 2020, according to SPACInsider. At the same time, small investors have become a potent force in the markets, driving up the stock prices of companies like GameStop (GME) and lapping up shares of SPACs, which are highly speculative and can pose financial risks.
In Lordstown, those forces eventually collided, highlighting the uneven playing field between Wall Street and Main Street. Small investors began piling into Lordstown shares after the merger closed, attracted to the hype around electric vehicles. That's exactly when BlackRock (BLK) and other early Wall Street investors – as well as top company executives, who all got their shares cheaply before the merger – began to sell some of their holdings.
Now Lordstown is flailing. Regulators are investigating whether its founder, Steve Burns, who resigned as chief executive in June, overstated claims about truck orders. The heat is on Mr. Hamamoto. The company has burned through hundreds of millions of dollars in cash. Its stock price has plunged to $9, from around $31. Investors are suing, including 70-year-old George Troicky, who lost $864,201 on his investment, according to a pending class-action lawsuit.
And Lordstown has yet to begin producing its first truck.
2) I think the carnage in the SPAC sector over the past few months has created massive investment opportunities comparable to the aftermath of the bursting of the Internet and housing bubbles in late 2002 and early 2009, respectively.
But, as was also the case back then, you can't just wade in, buying things willy-nilly. You either need to be an expert or be guided by one – like my colleague Enrique Abeyta, who's been investing successfully in the sector for more than two decades.
Later today after the market close, in the July issue of Empire SPAC Investor, Enrique is giving a "State of the SPAC Union" and a position-by-position update on his model portfolio.
Trust me, if you're investing (or considering investing) in this sector, you won't want to miss Enrique's thoughts on it. If you aren't already a subscriber, click here to learn more about Empire SPAC Investor and find out how you can get the latest issue risk-free.
3) In Monday's e-mail, I wrote the following about space-tourism company Virgin Galactic (SPCE), whose shares were up 7% to more than $52 pre-market in the aftermath of founder Sir Richard Branson's successful trip to space in one of the companies rockets on Sunday:
I'm happy for Branson and Virgin Galactic – but I'm not even tempted to recommend the stock again. Even though SPCE shares were up earlier this morning in pre-market trading, there's a high risk that this could be a huge "buy the rumor, sell the news" situation...
Sure enough, the stock has cratered this week, closing yesterday at $37.76. I think it's too early to bottom-fish – it will have to go below $20 before I get interested...
4) Investment banking giant Goldman Sachs (GS) reported strong second-quarter earnings after the close on Monday that handily beat analysts' expectations thanks to the U.S. economy roaring back to life.
I've been pounding the table on the stock since my December 18, 2018 e-mail, and it was our recommendation in the second issue of Empire Stock Investor on December 30, 2019, when GS shares were at $229.80. Since then, the stock is up 67% (including dividends), nearly double the 36% return of the S&P 500 Index. We're still holding shares in our model portfolio today.
5) Following up on Monday's and yesterday's e-mails about my Kurdish guide, Tarik, who got beat up when he was showing me around Istanbul, a reader who knows Turkey well wrote:
I think this is all about the Kurds vs. Turks and not about what Tarik said to the kid. In Turkey strangers often interfere in other people's raising of their kids – providing advice and even acting as if they were the parents.
But President Erdoğan has been fueling this battle, as if Kurds weren't Turks and haven't lived in the country probably before there were Turks. He's removed dozens of mayors from their jobs without reason (except for their ethnicity) and jailed countless more, including the leader of the Kurdish party for four years, for no other reason than that he was popular. Now Erdoğan has threatened to abolish the Kurdish party and has been successfully moving on doing that.
All of this leads to heightened levels of animosity across the country, combined with a failing economy, etc. So I perfectly understand what happened.
6) My Uzbek guide Farrukh and I took the high-speed train yesterday morning from Tashkent to the legendary, ancient city of Samarkand and spent the day visiting magnificent mosques, mausoleums, madrasas, and museums.
The artistry, scale, and engineering prowess of what I saw, which dates back more than 600 years, blew my mind, rivaling what I've seen in Athens, Rome, Vatican City (St. Peter's Basilica), Cairo and Luxor, Paris (Notre Dame cathedral), Guatemala (Tikal), Peru (Machu Pichu), etc.
Samarkand is nearly 3,000 years old, making it one of the oldest continuously inhabited cities in Central Asia. Prospering from its location on the Silk Road between China and the Mediterranean, at times Samarkand was one of the largest and richest cities in the region... if not the world.
It was conquered by Alexander the Great in 329 BCE and again by the Mongols under Genghis Khan in 1220, but not long thereafter reached the height of its glory when the conqueror Timur made Samarkand his capital in 1370. Over the next 35 years, he built one of the largest empires in history that encompassed much of today's Middle East, Central Asia, plus parts of India and Russia. As an undefeated commander, Timur is widely regarded as one of the greatest military leaders and tacticians in history.
He was also a huge patron of the arts. When he conquered areas, he spared the lives of artists, craftsmen, and architects so that they could improve and beautify his capital city.
Here are five of my favorite pictures of the mosques, mausoleums, and madrasas we saw:
I posted these pictures plus 25 more on Facebook here, including a handful of old photos showing how the sites had fallen into disrepair during the Soviet era before they were beautifully and lovingly restored by Uzbekistan following its independence in 1991. The before-and-after pictures are astounding, as are the ones I took last night when we returned to the two most spectacular sites we visited during the day – Timur's mausoleum and Registan Square. (I'm really pleased with how the night pictures came out using my new Samsung S21 Ultra phone.)
Here's a short 35-second video of two clips I took of the square during the day and at night, with the light show.
If you come to Uzbekistan and want a great guide, I highly recommend Farrukh – you can reach him at ibodullaev.citizentravel@gmail.com or +998 (99) 735 30 00.
Best regards,
Whitney