June 4, 2021 Sign Up

By Overheard on Wall Street

"If you want to make progress in any area, you need to be willing to give up your best ideas from time to time."

Happy Friday! It was not a great day for meme stocks as many went down more than double digits from the wild gains on the first three days of the week. The biggest losers were PETS (-28%), BBBY (-28%) and KOSS (-24%). AMC was down 18%, despite announcing free popcorn for retail investors the first time they attend a movie in an AMC theater this summer. They also announced plans for another #anodaone equity raise (25 million shares) after the 2,300% pump this year alone.

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1. Story of the Day: Bill SPACman

Bill Ackman's SPAC ($PSTH) is finally closing in on a home after nearly a year long hunt. The target is the world's largest music group, Universal Music Group ("UMG"). The deal would be the largest SPAC transaction ever and will value UMG at $40 billion. (Current #1 is Grab Holdings' $35 billon SPAC).

UMG is a subsidiary of French media company, Vivendi SE, and is the record label behind artists such Taylor Swift, Lady Gaga and the Weeknd. Their classic acts list is not that bad either with names such as Queen, Beatles and Bob Dylan. Pro forma for the deal Bill Ackman would own 10%, Vivendi 70% and Chinese internet conglomerate, Tencent with the remainder 20%.

Bill Ackman raised this $4 billion SPAC, Pershing Square Tontine Holdings, last July, and since then had us all playing guessing games who the lucky winner would be. This is also not Bill's first SPAC. He helped co-found one in 2012, with which he helped take Burger King public. Bill has recently shifted his activist focus, from attacking management teams (just ask Herbalife) to more peaceful and friendlier investments such as Starbucks.

Short Squeez Takeaway: There was a lot of speculation that Bill Ackman's SPAC would be picking up Stripe. The market was left disappointed by UMG and $PSTH was down 5% since the news broke. While UMG is no Stripe, it does give Bill Ackman a front seat in the glittery world of music, and a company with €7.4 billion in revenue and streaming tailwinds behind it.

2. Markets Rundown

• US stocks fell yesterday on concerns the Fed may withdraw its support sooner than expected after a strong May jobs report 
  
• Bitcoin gained yesterday but slid 3% after a cryptic broken-heart tweet by Elon Musk... Tesla potentially selling its Bitcoin?

Movers & Shakers

• (+) Elastic ($ESTC) +10% on outperforming earnings estimates.
• (+) Fisker ($FSR) +9% after a positive industry report from Morgan Stanley.
• (–) Splunk ($SPLK) -10% after reporting wider than expected Q1 losses.

3. Top Reads

4. Book of the Day: The Big Nine: How the Tech Titans and Their Thinking Machines Could Warp Humanity

In her book, The Big Nine, Amy Webb, a professor of strategic foresight at NYU Stern School of Business, Amy is clear, precise and provocative, calling the big nine tech companies (Amazon, Google, Facebook, Tencent, Baidu, Alibaba, Microsoft, IBM and Apple) the G Mafia.

These are the nine companies that are responsible for the majority of new patents, most of the funding, and a lot of the IP (intellectual property) that are essentially creating the future of AI (artificial intelligence). As a result, they’re basically making decisions about the future of humanity.

Highly recommended for anyone wanting to learn more about the development and future outcomes of artificial intelligence in the coming decades.

5. Daily Visual: US Travel Reaches Pandemic High

Source: CNBC

6.  Tip of the Day: Getting Rich vs Staying Rich

In the 1920’s, Abraham Germansky, a real estate developer, loved betting on stocks as the market boomed throughout the decade until of course the year 1929 came around when he got completely wiped out. Germansky committed suicide a few days later.

That same week, another investor, Jesse Livermore, came home to his wife who was ready to return to a frugal life again, hearing that the stock market had crashed. Jesse told his wife that he was short the market and has made more money than he would ever know what to do with. Back in 1929, Jesse made the equivalent of $3 billion adjusted for inflation.

Over the next 4 years, Jesse kept making bigger and bigger bets and ended up going broke with the help of leverage. This is similar to how casinos almost always win even if you do strike it rich as most will continue betting until they hit zero.

Getting rich is one thing but staying rich is another. The more successful you are at something, the more convinced you are that you’re invincible.

After getting rich, don't forget about fear and humility.

7. Memes of the Day

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