Bitcoin Trades Above $50,000, Two SPACs To Avoid

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Bitcoin Trades Above $50,000, Two SPACs To Avoid

Whitney Tilson’s email to investors discussing bitcoin trades above $50000 for first time; his  thoughts on btcoin and SPACs; two SPACs to avoid; Empire SPAC Investor; EHang: a stock promotion destined to crash and burn.

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Q4 2020 hedge fund letters, conferences and more

Bitcoin Trades Above $50000 For First Time

1) Bitcoin traded above $50000 for the first time yesterday, as this front-page story in today's Wall Street Journal highlights. Excerpt:

Q4 2020 13F Round-Up: Notable Hedge Fund Changes Including Pabrai, Abrams, Price, Klarman And More!

InvestingBelow is our 13F roundup for some high profile hedge funds for the three months to the end of December 2020 (Q4). Also check our screener for more detail! Q4 2020 hedge fund letters, conferences and more The statements only include equity positions as 13Fs do not include cash and debt holdings. What's more, the Read More


Bitcoin topped $50,000 for the first time Tuesday, doubling in value in less than two months.

The digital currency traded as high as $50,584.85, before closing at $48,642.45, according to CoinDesk, up 0.95% for the day and 68% for the year, with a total market value in circulation close to $909 billion.

The $50,000 level is an "emotional level for people in the space," said Brian Melville, head of strategy at trading firm Cumberland. But it is also a simple result of supply and demand, he added...

I just re-read what I wrote the last time I commented on bitcoin, in my December 18 e-mail, and wouldn't change a word today. Excerpt:

I would never short any cryptocurrency – ironically, for the exact same reason I would never own one: there's no intrinsic value. Therefore, it can literally trade anywhere – $100, $1,000, $10,000, $100,000, or even $1 million! You never want to be short an open-ended situation like this.

Nor do I think cryptocurrencies are going to collapse imminently, as I did three years ago. Unlike then, these days I am not being "asked about bitcoin by a parade of the least-knowledgeable investors imaginable." In fact, quite the opposite: more mainstream people and firms are getting involved, which may give the sector legs for a while, as this Wall Street Journal article notes: Bitcoin Exchange Coinbase Files for Initial Public Offering. Excerpt:

Bitcoin has begun to win mainstream acceptance this year. Investors including Paul Tudor Jones and Stanley Druckenmiller and companies such as Massachusetts Mutual Life Insurance have disclosed bitcoin holdings in recent months. Other companies including Square (SQ), PayPal (PYPL), and Robinhood Markets have opened up their platforms to crypto trading.

In summary, I think you will lead a happier and more prosperous life if you avoid cryptocurrencies altogether.

If, however, you insist on allocating a small portion of your portfolio to this sector, at least find an experienced expert to guide you – like Eric Wade, the editor of Stansberry Research's Crypto Capital newsletter. Here's a picture of us when I had lunch with him in Los Angeles 13 months ago:

It's a risky sector (which Eric of course acknowledges), but he looks for the cryptos that are designed for a specific, useful purpose... such that they have a real chance to survive, endure, and grow. That's what I would do if I were investing in this corner of the market.

You can learn more about Crypto Capital here.

My Thoughts On Bitcoin And SPACs

2) Speaking of hot sectors, special purpose acquisition companies ("SPACs") set an all-time record last month... raising nearly $26 billion in January, as this New York Times article from last week explains: Wall Street's New Favorite Deal Trend Has Issues. Excerpt:

Hundreds of these publicly traded shell companies are being created by everyone from KKR, the leveraged-buyout firm, to Alex Rodriguez, the baseball player turned entrepreneur. Just on Tuesday, the football player Colin Kaepernick filed for his own $250 million SPAC.

These vehicles have only one purpose: to find a private company and buy it, usually within two years. SPACs are sometimes known as "blank check" companies – as in, investors give them a blank check to go buy a business, sight unseen.

Those checks are getting bigger and bigger, with SPACs raising nearly $26 billion in January, a monthly record in an already red-hot market.

This brilliant graphic in the Wall Street Journal shows how SPACs have come to dominate the initial public offering ("IPO") market over the past eight months (in fact, in the first six weeks of this year, SPACs have raised $38.3 billion... nearly double the $19.8 billion from traditional IPOs):

The New York Times article above notes that:

There are more than 300 SPACs with some $100 billion in cash currently seeking acquisitions, according to the data service SPAC Research. Since SPACs typically buy companies five times their size, thanks to outside investments, that implies something like $500 billion in potential buying power.

The sector is definitely getting frothy... and there's no way that these 300-plus SPACs, as a group, will do well. In particular, my colleague Berna Barshay has identified two SPACs to avoid in her Empire Financial Daily (which you can sign up for here):

Clearly, if you're going to invest in this sector, you need a savvy guide who knows it backward and forward... and there's nobody better than my colleague Enrique Abeyta, who launched his Empire SPAC Investor newsletter in October. Since then, he's recommended seven SPACs, every one of which has made money – and, collectively, they're up an average of 49% versus only 10% for the S&P 500 Index (excluding last week's new pick).

Click here to sign up for Empire SPAC Investor. If you're not satisfied for any reason, just call our customer service team within 30 days and we'll give you a full credit... which you can apply to any other Empire Financial Research product.

EHang: A Stock Promotion Destined To Crash And Burn

3) Kudos to Dan David of Wolfpack Research for exposing yet another obvious Chinese fraud that's been foisted upon U.S. markets, drone company EHang (EH), whose stock crashed 63% yesterday – wiping out $4.4 billion of market capitalization.

You can read his full report here: EHang: A Stock Promotion Destined to Crash and Burn. Excerpt:

Today, we reveal why we believe EHang is an elaborate stock promotion, built on largely fabricated revenues based on sham sales contracts with a customer who appears to us to be more interested in helping inflate the value of its investment in EH, i.e., pump EH's stock price than actually buying its products. EH has perpetuated its story with a collection of lies about its products, manufacturing, revenues, partnerships, and potential regulatory approval of its purported main business, an "autonomous" aerial vehicle "AAV" ridesharing network.

Summary

We conclude that EH's relationship with its primary purported customer is a sham. Government records and credit reports show that EH's major customer is Shanghai Kunxiang Intelligent Technology Co., Ltd. hereinafter referred to as "Kunxiang." We have gathered extensive evidence including behind-the-scenes photographs, recorded phone calls, and videos of on-site visits to EH's various facilities, as well as Kunxiang's offices which lead us to believe that Kunxiang signed sham sales contracts to benefit its investment stock price in EH.

  • Kunxiang has an exaggerated physical presence and its real operations appear to be a fraction of what is claimed. Out of the three addresses listed on Kunxiang's website, one is a hotel with no Kunxiang presence, one is a 13th floor address of an 11-story building, and the last one had only one Kunxiang employee in the office on a weekday afternoon.
  • To the extent Kunxiang actually does sell vehicles, it did not want to sell EH's products to us. When asked, the only employee on-site at Kunxiang, who claimed to be the finance manager, had no hesitation voicing his disapproval of the EH216, and instead offered their own, supposedly much higher quality products for sale.

So many Chinese companies listed on U.S. exchanges have proven to be total frauds that I've called for removing all of them to protect American investors!

Best regards,

Whitney

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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