SPAC Investment Summit on October 8; General Motors extends talks on Nikola deal; Spruce Point short report on Sunnova Energy; The Underused Weight Loss Option: Bariatric Surgery

By Whitney Tilson

Wednesday, September 30, 2020

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.

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…)

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…

4) This article in the New York Times really changed my view on bariatric surgery, which I thought was highly risky and therefore only appropriate for the most extreme cases: The Underused Weight Loss Option: Bariatric Surgery. Excerpt:

Growing rates of obesity among Americans are clear evidence that even the best intentions and strongest motivations are often not enough to help seriously overweight people lose a significant amount of weight and, more important, keep it off.

But for those who can overcome fears of surgery and perhaps do battle with recalcitrant insurers, there remains another very successful option that experts say is currently vastly underused. That option is bariatric surgery, an approach that is now simpler, safer and more effective than in its early days in the 1990s.

“Only one-half of 1 percent of people eligible for bariatric surgery currently undergo it,” Dr. Anne P. Ehlers, a bariatric surgeon at the University of Michigan, told me.

Bariatric surgery is generally considered a treatment option for people with a body mass index (B.M.I.) of 40 or more who failed to lose weight with diet and exercise alone. It is also recommended for those with lesser degrees of obesity – a B.M.I. of 30 to 35 – who have obesity-related medical conditions.

The underuse of weight-loss surgery has been largely attributed to “the reluctance of the medical community and patients to accept surgery as a safe, effective and durable treatment of obesity,” other experts at the University of Michigan wrote in JAMA in 2018.

They added that patients “may be reluctant to pursue surgical treatment because they may be judged by others for taking the easy way out and not having the willpower to diet and exercise.”

Although willpower is clearly an inadequate tool for millions now struggling with obesity, “many may feel like failures if they opt for surgery,” Dr. Ehlers said in an interview.

Yet this stigma, real or imagined, may be keeping many people from a treatment that not only can result in long-term weight loss but can also significantly improve physical and emotional health and even longevity.

Disorders that can be reduced or reversed by bariatric surgery include Type 2 diabetes, heart disease, high blood pressure, elevated cholesterol, gastroesophageal reflux disease (GERD), obstructive sleep apnea, breast cancer, colorectal cancer, urinary incontinence, infertility and fractures. Death rates may be reduced by nearly 50 percent, especially among people 55 and older.

I only know one person who’s had the surgery – a friend from college. He looks and feels great!

Best regards,


Whitney Tilson
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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

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