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Whitney Tilson’s email to investors discussing SPAC Investment Summit on October 8; General Motors extends talks on Nikola deal; Spruce Point short report on Sunnova Energy.

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Q2 2020 hedge fund letters, conferences and more

SPAC Investment Summit

1) I’m going to be writing quite a bit in upcoming e-mails about special purpose acquisition companies (“SPACs“).

These “blank-check companies” are both an alternative way for private companies to go public, eschewing a traditional initial public offering (“IPO”). They also represent a new asset class, open to all investors, not just institutions or high-net-worth individuals.

SPACs have been around for decades but, until recently, have performed poorly… mainly because both the SPAC “sponsors” and the companies they merged with were of questionable quality (to put it kindly).

But now the sector is white-hot: SPACs have raised $40 billion so far this year – three times as much as in 2019 – and are attracting top sponsors and companies. This is creating great investment opportunities – but it’s also attracting charlatans, con men, and stock promoters, so investors need to be careful!

That’s why, on Thursday, October 8, I’ll be joining my colleague Enrique Abeyta for the SPAC Investment Summit.

Both of us have years of experience in the industry. I created a special SPAC-focused side fund during the global financial crisis in 2008 to 2009, which quickly doubled investors’ money. And Enrique has invested $250 million in pre-IPO deals over his 25 years on Wall Street.

During the Summit, we’ll explain everything you need to know to make money in this sector… how to avoid the traps… and why, right now, we’ve never been more bullish on SPACs.

Investing legend Bill Ackman will also be making an appearance to discuss the sector and his latest venture launching the largest SPAC ever a few months ago.

It’s a can’t-miss event, and it’s completely free to attend. Just make sure to reserve your spot… you can do so right here.

General Motors Extends Talks On Nikola Deal

2) As I predicted in yesterday’s e-mail, General Motors (GM) is extending talks with electric-truck maker Nikola (NKLA) – the first step, I expect, to walking away from the deal: GM extends talks on $2 billion deal with Nikola after fraud, sexual assault allegations surface against Trevor Milton. Excerpt:

  • The deal was initially viewed as a no-lose situation for GM.
  • The partnership would give the Detroit automaker an 11% stake in the company for supplying Nikola battery and fuel cell technologies as well as producing Nikola’s Badger pickup.
  • Executives at both companies are expected to extend the talks, two people familiar with the matter said, asking not to be identified because the negotiations aren’t public.

(P.S. Nikola is a cautionary tale, as it came public via a SPAC…)

Spruce Point Short Report On Sunnova Energy

3) Another activist short-seller I know with an excellent track record is Ben Axler of Spruce Point Capital Management. Yesterday, he issued his latest report on solar energy company Sunnova Energy (NOVA), entitled Is There Really Something New Under the Sun? Here’s the summary:

  • Believes Evidence Clearly Shows That Sunnova’s Senior Management Has Obfuscated Ties to Past Failures and Fraud in SEC Filings, Including CEO William Berger’s Tenure at Enron
  • Contends Sunnova Is Being Promoted as a Hot Play on Solar Energy, but in Reality Is a Specialty Finance Business Without Meaningfully Differentiated Offerings
  • Shows That Sunnova Is Overleveraged and Dependent on Aggressive Financial Presentation, Accounting, and Non-GAAP Metrics Overly Flattering Its Performance
  • Underscores That a Former Sunnova Executive and Industry Experts Agree that the Company Has an Undifferentiated and Misunderstood Business Model
  • Spruce Point Estimates that Sunnova’s Shares Face 80% Downside Risk

The stock initially fell more than 12% yesterday morning after Spruce Point released its 91-page report, but then rallied and finished the day up slightly.

I don’t know Sunnova or its industry well enough to have a strong opinion on this particular stock – but if I owned it, I’d be reading Spruce Point’s report very carefully and thinking hard about taking some profits…

Best regards,

Whitney

 

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