Short Shopping

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There is another Bear besides Tim in these market woods. The Knight may be the biggest and baddest of them all, but it is another bear to whom this post gives attention.

The other bear is Edwin Dorsey. He publishes a newsletter – one version free, the other behind a paywall. This shopping list of short suggestions comes from Edwin’s free Substack newsletter, The Bear Cave.

There was a time when I asked Son if Grandson used Roblox. That was awhile ago and things have changed. I am not going to belabor the horror that Roblox is, but you can read all about it here:

To say Roblox is a wretched company is putting it nicely. Way too nicely. Suffice it to say, I hope this company is run out of town. It’s tail must surely be between its legs, because this dawg [no reference to mutt friends] is running scared. Earnings are May 4.

Here’s the daily chart. I felt forced to add an arbitrary additional lower trend line. What else is there to do when there’s nothing there to catch the fall.

Short it, everyone, please. They deserve to be slapped senseless.

Next candidate is Innovative Industrial Properties, IIPR, a REIT, and in their words, focused on the acquisition, ownership and management of properties leased as medical-use cannabis facilities. Dorsey reports that a publication by Blue Orca Capital, describes the REIT as focused on sale-leaseback transactions.

Dorsey reports that Blue Orca Capital warned of “imminent risk of default at its largest tenant” and highlighted that the tenant tried and failed to merge with a SPAC led by Justin Bieber’s manager Scooter Braun. Blue Orca also highlighted that Innovative Industrial Properties consistently pays above-market prices in sale-leaseback transactions and risks severe markdowns if tenants default. Blue Orca found the company’s publicly traded tenants have fallen ~50% in the last year, which may be a proxy for struggles in the industry.

Blue Orca concluded:
“IIPR’s stock price is a bet that its tenants can continue to pay rent at above market rates for the next 15–20 years. Tenant quality is paramount, making the severe distress and default of IIPR’s largest tenant a hammer blow to IIPR’s perception as a safe, boring REIT. As tenants struggle, we think investors will find much less value in IIPR’s property portfolio than they previously assumed.”

Dorsey adds, The “Up in Smoke” newsletter also criticized the company in December 2020 and focused on the changing regulatory landscape.

Here’s the IIPR monthly chart, followed by the daily.

Lastly is DWAC. About this charming fellow, here’s what The Bear Cave reports:

Kerrisdale Capital published on Digital World Acquisition Corp, a SPAC attempting to merge with Donald Trump’s Truth Social platform at a ~$8 billion valuation. Kerrisdale wrote, that Digital World Acquisition Corp “will never secure the necessary regulatory approval to close its proposed merger” and cited an active SEC investigation and increasing scrutiny on SPAC mergers. In addition, Kerrisdale highlighted that ARC Group, a Shanghai-based sponsor behind the SPAC, has been repeatedly sanctioned by the SEC.”
Kerrisdale concluded, “With each passing day, the truth becomes harder to deny; a merger between two sketchy companies that is already taking too long is likely headed for collapse. We value DWAC at the cash held in trust: $10 (-80%).”

Well, alright then. With its IPO this past September, no need for other than the daily chart, and what a Beaut it is.

Happy Short Shopping.