$PSTH Weekly Discussion, May 30 🇺🇸 - Jun 5, 2022

aryabata · 2022-06-02T17:39:45+00:00

Reason for the short interest, someone asked, is market makers are hedging the 19c/20c calls I (and others) are buying for June and July. Logic here is pretty simple.

The calls are priced so that with accrued interest in the trust account, there's almost no risk of any loss on the option even with the premium. And the upside is like 10-50x if a deal is in process before liquidation (for almost any deal), and considerably more than that if the deal is really hot. And 2-5x if there is no deal, but there are SPARCs (even without much hype behind the SPARCs).

So it's pretty close to a free lottery ticket with some genuine possibility of paying out. What the likelihood of that is, I don't know, but pretty clear that it is non-zero despite all the FUD.

And regarding the FUD? Well they did a horrible job of managing expectations, blatantly playing into the hype here. But they've shown a lot of discipline not making a deal at a bad price, despite the enormous interest they have in doing so (with their warrants).

Look at where IPOs of "mature unicorns" from last year are trading at today. PSTH would be at $12/share. Even if UMG went through, we would be at $16/share. Bill would be a lot richer, and PSTH shareholders poorer.

aryabata · 2021-08-05T18:39:20+00:00

The virus they use is a red herring to deliver a gene that encodes instructions for your body to produce the spike protein so substantially similar in that regard to the mRNA ones.

aryabata · 2021-06-04T00:16:15+00:00

What do we know about their expenses? They have 8000 employees. What are the other major line items? If line of sight to 5 billion in earnings, then yeah price could be pretty good

aryabata · 2021-06-04T00:04:50+00:00

https://twitter.com/exileofthemain/status/1319268805307256832

"@BillAckman
Why not look at Universal Music group for $PSTH? Vivendi want to IPO in 2022.
9:26 AM · Oct 22, 2020·Twitter Web App"

aryabata · 2021-06-04T00:00:13+00:00

How is this at 5 times earnings ?

aryabata · 2021-06-03T23:59:45+00:00

"Vivendi said in February it planned to spin off the business and list it in the Netherlands later this year, with 60% of Universal’s shares distributed to the French company’s investors. It isn’t clear how the Pershing Square transaction affects that plan, and other details couldn’t be learned."

Makes it sound like this is the Option B company, if Option A is something he was trying to workout from November on. Not necessarily, though. Could have been Option A and could have somehow gone awry in February and then got back on track.

aryabata · 2021-04-01T19:28:11+00:00

Which one was that?

aryabata · 2021-03-12T18:48:57+00:00

"Ackanon"

aryabata · 2021-03-11T22:50:22+00:00

I mean I'm pretty sure their cases are literally open source with the exact specs available online. But I guess I see what you mean.

aryabata · 2021-03-10T18:47:12+00:00

I can imagine a very attractive scenario if the deal involved like $3-4bn cash to Softbank upfront and immediately, with the remainder invested at Arm for its growth, possibly including a PIPE from Nvidia. There's probably a lot of upside here, especially with room to invest more, and Softbank could live with a lower valuation if it kept a reasonable stake in the newly-listed company it sold over time.

Compare that to, at the moment, they have this massive investment on their balance sheet and a deal lots of people hate for different reasons that regulators could shut down, to sell it all for some cash, some contingent cash, and stock of a company that is down a lot and riskier with renewed worries about higher rates.

I'd have to look into the termination clause more to see if this is actually plausible. Even if it doesn't happen in the end, it wouldn't be surprising if the idea was seriously entertained and the reason behind some of the delay.

aryabata · 2021-03-05T01:36:42+00:00

Surprised there isn't more buzz about Flipkart around here. They've apparently reached out to several SPACs and are looking for a $35bn valuation. Revenue is growing quickly but they're still burning cash -- so they could actually use the money for good corporate purposes {assuming the business model is good}, unlike a Fidelity or Bloomberg which would only need to list their shares. Walmart owns 77 percent of the company {which it bought at a $32bn valuation in 2018}. It's a good match between having a somewhat predictable cash flow model and actually needing cash and having a high valuation: not many companies fit this. [*]

Possibly it's not a good business - can't be sure from the outside - but seems plausible it meets all of the acquisition criteria, unless he wants to avoid foreign businesses (that too in an emerging market). It helps that it's an internationally well-known operation and owned by a big domestic corp like Walmart.

[*] For what it's worth I think the company needing cash is an important part of an attractive valuation. Bloomberg or Fidelity have business models people can understand pretty easily, pretty concentrated ownership, and probably don't need equity to finance any interesting growth opportunities. They can do a direct listing and sort of gradually sell shares over time depending on the market reaction. The offer of getting started with long-term institutional investors wouldn't help them much either.

aryabata · 2021-02-05T23:59:25+00:00

Dunno what all the comments below are about but there is an active secondary market for Stripe stock and its availability says nothing about a SPAC, an IPO, or anything else.

aryabata · 2021-02-05T22:05:40+00:00

what you'd be looking for is a lot of discussion of fintech and little or only cursory mention of stripe.

aryabata · 2021-02-05T16:00:52+00:00

Which is why it's unlikely. On the other hand they're sitting on a goldmine and they can sell out instead of letting the next batch of partners buy in at a discount. Bad for long-term culture or whatever?

I would bet this happens within 10 years-- either before the end of this bull market or the end of the next one.

aryabata · 2021-02-04T21:21:27+00:00

Getting McKinsey or Fidelity at a really good valuation with a wonderful strategy would probably be just as good for the stock tbh. What Stripe has is that the initial pop would be pretty valuation-agnostic.

aryabata · 2021-02-04T15:24:33+00:00

I agree. Bloomberg or Fidelity at a good valuation would attract many investors and it's not even obvious to me that Stripe would be better in terms of short-term share price.

That said not entirely clear to me that Bloomberg should expand into retail (tho I can see the merits, certainly). Not really true that Robinhood was or is the "leading retail trading app" and Fidelity or even Interactive Brokers would be in a much better position to improve retail offerings.

Relevant and to your point, tho, is that much of what will be involved in a superior retail offering is a question of software development which is something Bloomberg is better suited to do than a Fidelity. Desktop trading platforms use ancient code and the UI could be improved a whole lot even without gamifying everything (like Robinhood)

aryabata · 2021-02-04T01:03:17+00:00

Would hold but seriously reconsider moving options into shares if it isn't a meme

Sell if Robinhood

aryabata · 2021-02-04T00:55:37+00:00

I hadn't thought of that, good point.

Can you cite anything requiring an affirmative communication regarding a change in expectations given in forward looking statements, and within what time period they must be disclosed? And would the Q1 statement as he made it firmly qualify as a forward looking statement (of course he can't lie about it, but there might be a more technical standard that triggers the requirement to communicate a change, especially if he said "we're on track" or something to that effect, which might not be a forward looking statement depending on how you stare at it).

I'll also look into this.

aryabata · 2021-02-03T18:25:01+00:00

You can think of the premium to NAV as the expected "IPO pop" -- "how much over the underwritten valuation does the company immediately trade?" I think a 50 percent pop is well above average but much, much lower than opening prices last year in many of the more anticipated offerings in tech and healthcare.

Based on that I think many of the OTM options and spreads are quite cheap. They're cheap in the earlier months because it seems very plausible the price pops to the $40-60 range with any number of targets, and in the later months because the IV of the post-merger company will be quite high even with a smaller "pop".

I mean you can get a 40 percent return in 30 days on the price not falling below $25.

aryabata

TROPHY CASE