Deal partner for Trump's Truth Social fails to get backing for SPAC extension; Bed Bath & Beyond Names Interim CFO After Arnal's Death; Movie Theaters Had a Great Summer. But There's a Plot Twist; Binge weekend at the U.S. Open

1) In Friday's e-mail, I wrote that shares of Digital World Acquisition (DWAC), a SPAC that has a deal to merge with former President Donald Trump's new social media company, Truth Social, "should be avoided at all costs."

Sure enough, DWAC shares are crashing today on news that shareholders failed to approve a much-needed one-year extension to close the deal: Deal partner for Trump's Truth Social fails to get backing for SPAC extension. Excerpt:

The blank-check acquisition firm that agreed to merge with Donald Trump's social media company failed to secure enough shareholder support for a one-year extension to complete the deal, people familiar with the matter said on Monday.

At stake is a $1.3 billion cash infusion that Trump Media & Technology Group ("TMTG"), which operates the former U.S. president's Truth Social app, stands to receive from Digital World Acquisition, the special purpose acquisition company ("SPAC") that inked a deal last October to take TMTG public.

The transaction has been on ice amid civil and criminal probes into the circumstances around the deal. Digital World had been hoping that the U.S. Securities and Exchange Commission ("SEC"), which is reviewing its disclosures on the deal, would have given its blessing by now for the transaction to proceed.

Most of Digital World's shareholders are individual investors and getting them to vote through their brokers has been challenging, Digital World Chief Executive Patrick Orlando said last week.

Digital World needs 65% of its shareholders to vote in favor of the proposal to extend its life by 12 months for the move to become effective. By Monday evening, far fewer Digital World shareholders than those required had voted in favor, the sources said.

The outcome of the vote is set to be announced at a special meeting of Digital World shareholders on Tuesday. Digital World executives do not believe they will be able to muster enough shareholder support in time and have started to consider alternative options, according to the sources.

Despite only having $10 per share of cash in the bank, the stock became a favorite of the meme stock speculators and soared as high as $175 shortly after the deal was announced. Since then, it has been all downhill for DWAC shares...

I've written about DWAC in more than three dozen e-mails over the past year – warning my readers about this scam and labeling it my No. 1 stock to avoid because it's almost clinically designed to destroy the naïve individual investors lured into it.

To be clear, I have no problem with the concept behind the business. If Trump, after being kicked off of Twitter (TWTR), wants to launch a competitor, great! I just don't think the business is anywhere near the point at which it should be a public company...

Thus, I was glad to see that Trump agrees with me, posting the following:

In summary: DWAC's goose is cooked. As I have long predicted, this deal isn't going to happen... which means that DWAC's stock will soon fall to around its cash value of $10 per share – down 50% from here.

2) Another one of my stocks to avoid, struggling retailer Bed Bath & Beyond (BBBY) is also plunging today on the tragic news that its CFO jumped to his death on Friday: Bed Bath & Beyond Names Interim CFO After Arnal's Death. Excerpt:

Bed Bath & Beyond promoted its chief accounting officer to interim chief financial officer after the death of former finance chief Gustavo Arnal...

Arnal, the former CFO, fell to his death September 2 from a Manhattan skyscraper. The shares of the struggling home-goods retailer slumped by as much as 17% on Tuesday, the first day of trading after the news was reported over the U.S. Labor Day weekend...

confirmed September 4 that the 52-year-old Arnal had died. The New York City Medical Examiner's Office ruled the death a suicide, according to the New York Times.

Arnal was among the Bed Bath & Beyond executives who provided details last Wednesday on the company's turnaround plan, which included cutting 20% of jobs across its corporate and supply-chain operations and closing about 150 lower-producing stores. The plan also envisioned new financing and the sale of as many as 12 million shares to enhance liquidity as it fights to survive.

Arnal joined the retailer in May 2020 as it navigated the pandemic. He was previously with Avon Products, Walgreens Boots Alliance, and Procter & Gamble.

My take: I don't know why Arnal decided to take his own life, but it's hard to believe he would have done so if the company were on the verge of a turnaround. More likely, he saw what I see: a bankruptcy filing in the near future...

3) Lastly, this NYT article over the weekend relates to another idiotic meme stock that I've warned my readers to avoid, AMC Entertainment (AMC): Movie Theaters Had a Great Summer. But There's a Plot Twist. Excerpt:

The hits just keep on coming. But not the ones movie theaters need.

Unwelcome forces – Netflix, 50-inch TVs, the coronavirus pandemic – have buffeted cinemas for years. Now, staggering debt and a severe shortage of big movies to show in the months ahead imperil multiplex chains once again.

In recent months, the situation didn't look so dire. Theaters were feeling newly optimistic, largely because Top Gun: Maverick and several other blockbusters showed that people still want to go to the movies. The Top Gun sequel has taken in an astounding $1.5 billion worldwide, and Doctor Strange in the Multiverse of Madness outperformed its 2016 franchise predecessor by 41%.

"Let the good times roll," Adam Aron, the chief executive of AMC Entertainment, said during an earnings call last month.

And yet, behind that rosy view, instability lurked. Summer ticket sales still lagged significantly behind prepandemic levels. Some studios continue to release films on streaming services and in theaters at the same time, or bypass theaters altogether, and the cost of running a theater keeps climbing...

Attendance at movie theaters in the United States and Canada peaked in 2002, when they sold about 1.6 billion tickets, according to the Motion Picture Association. The big studios and their specialty-film subsidiaries released at least 140 films in theaters that year, with an original drama (Signs) and an original comedy (My Big Fat Greek Wedding) among the top five performers. This year, admissions are expected to fall below 800 million, in part because of plunging output by the biggest studios, which will release only about 73 films in theaters, with big-budget sequels the most attended.

Over that same time, the number of movie screens has increased 14%, as multiplexes have popped up in the far suburbs and theaters built during a boom in the 1990s have limped along on life support. In a report released on August 23, Robert Fishman, a senior analyst at MoffettNathanson, a research firm, described the movie exhibition business as "in dire need of restructuring," noting that many theaters are "connected to zombie malls."

As successful as theater companies view the summer, they sold only 17% of the available seats in the United States, according to EntTelligence, a research firm.

My take: AMC CEO Aron has cleverly (and cynically) exploited the foolish investors who pumped up his stock, raising more than $2 billion by issuing a mountain of stock, taking the share count from just over 100 million to more than 500 million in a year.

This cash was a lifeline that staved off bankruptcy... but only temporarily, I suspect. AMC continues to hemorrhage cash, so I can't see how it will ever be able to service much less repay its more than $5.4 billion of debt (plus an additional $4.5 billion in long-term lease obligations).

As the NYT article correctly notes, the entire industry needs to downsize massively and restructure, which can only happen in bankruptcy.

4) My parents are heading back to New Hampshire today after our annual binge at the U.S. Open, which we attended every day this weekend.

The highlight was last night...

After we watched Frances Tiafoe's amazing upset of Rafael Nadal during the day at Arthur Ashe Stadium, we went over to Louis Armstrong Stadium for the last two matches, but just as we were settling into our seats, a friend called and gave us 7th row box seats for the night session at Arthur Ashe, featuring 19-year-old phenom Carlos Alcaraz playing veteran former champion Marin Čilić. It was awesome having such great seats for an amazing five-set match. Here's a picture of us:

And here's a 46-second video clip I took of Alcaraz warming up – it reminds me of basketball player Steph Curry's pregame routine...

Best regards,

Whitney

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