Another Collapsed SPAC, Lottery.com, Discloses WTF Horror List and Says it Will Liquidate Unless Miracle Happens

The years 2020 and 2021 will go down as the greatest era ever of consensual hallucination and financial gangsterism.

By Wolf Richter for WOLF STREET.

Another hype-and-hoopla “leading technology company” SPAC implodes and splinters into a million pieces amid investigations, fake accounting, unpaid payroll, missing cash, undisclosed debt, possible violations of state and federal laws, and a fired CFO. Just 18 months after going public! So this is a fun one for my Imploded Stocks column that I started last year to document how this clown show is coming unglued.

In an SEC filing this evening, Lottery.com, which describes itself as a “leading technology company,” but sells lottery tickets online, disclosed a laundry list of WTF-horror items, including that it’s going to shut down and vanish unless a miracle happens. On July 29, it already pre-announced its demise when it disclosed in an SEC filing that it wasn’t able to meet payroll and that it had laid off the “majority” of its employees.

The company announced in November 2020 that it would go public via merger with a SPAC. The merger was completed in February 2021, the infamous February after which it all started coming apart. Shares [LTRY] hit an intraday high of $17.50 in November 2021 and then kathoomphed, trading below $1 since mid-July. Everyone knows this stock is a goner and will go to zero, but folks are still shuffling it back and forth amongst each other to try to make a buck without ending up becoming the end-user of the shares after bids vanish (data via YCharts):

In the filing with the SEC this evening, where the company explained why it cannot file the required quarterly 10-Q earnings report for Q2 by the deadline, it disclosed a list of WTF horror show items.

Non-compliance with state and federal laws. The company said that an independent investigation by “outside counsel” it had retained “revealed instances of non-compliance with state and federal laws concerning the state in which tickets were procured as well as order fulfillment.”

Internal accounting controls, forget it. CFO got fired. The company said: “The investigation also identified issues pertaining to the Company’s internal accounting controls.” Following the report, the company fired effective July 1 its CFO, who was also the President and Treasurer. And it named a new CFO.

Auditors: $30 million in cash not there, $30 million in revenues not there either. Someone just made it up, it seems. A review found that the company has:

  • “overstated its available unrestricted cash balance by approximately $30 million”
  • and in the prior fiscal year, had “improperly recognized revenue in the same amount.”

Auditors find undisclosed $20 million in debt. Auditors “advised and determined” that a subsidiary “entered into a line of credit in January 2022 that was not disclosed in the footnotes to the December 31, 2021 financial statements and was not recorded in the March 31, 2022 financial statements.”

Auditors: ignore the financial statements. “The audited financial statements for the year ended December 31, 2021, and the unaudited financial statements for the quarter ended March 31, 2022, should no longer be relied upon.”

Could not make payroll, laid off majority of staff. “On July 28, 2022, the Board determined that the Company did not have sufficient financial resources to fund its operations or pay certain existing obligations, including its payroll and related obligations, and the Company furloughed the majority of its employees effective July 29, 2022.”

Out of cash. Obviously, since it couldn’t make payroll at the end of July, and somewhat belatedly, the company now says not without a sense of humor that, as its “capital resources are not sufficient to fund its operations for a twelve-month period, there is substantial doubt about the Company’s ability to continue as a going concern.”

Unless a miracle happens and a lot of cash shows up somehow, it’s over and “the Company will be forced to wind down some or all of its operations and pursue options for liquidating the Company’s assets, including equipment and intellectual property.”

Because of all this crap going on, the company doesn’t have any financial statements that can be relied on and “therefore” cannot file them with the SEC “on a timely basis.”

Why did this hype-and-hoopla mania ever happen?

This question will be studied for years. But my preliminary answer is that the benighted reckless money-printing by the Fed and by other central banks, combined with enormous stimulus payments sent by the government directly to consumers, businesses, and state and local governments created the greatest “anything goes” asset bubble ever that created the greatest consensual hallucination ever that was then brutally taken advantage by the people on Wall Street, in Silicon Valley, and elsewhere that engineered these SPACs and IPOs and crypto scams and crypto company IPOs, and the whole DeFi fiasco, and all the other stuff that many millions of people swallowed hook, line, and sinker, powered by said consensual hallucination.

And now it’s all coming apart. This won’t be over for years. This is way too big to be cleaned up by the small correction we’ve had so far.

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  124 comments for “Another Collapsed SPAC, Lottery.com, Discloses WTF Horror List and Says it Will Liquidate Unless Miracle Happens

  1. Magic_8_balls says:

    Guess they rolled the wrong numbers

    • 2banana says:

      Considering it was fraud from day one, there were no “right” numbers except for insiders to sell their stock and options for big loompas and umpaas and then skeedatle.

  2. Mel says:

    well, the intellectual wind down shouldn’t take more than a couple of minutes

    • 2banana says:

      Except for the jail time for fraud and GAAP violations.

      And the previous auditors, along with the audit company, need to be made public and investigated.

      ““The audited financial statements for the year ended December 31, 2021, and the unaudited financial statements for the quarter ended March 31, 2022, should no longer be relied upon.”

      • cas127 says:

        Wolf,

        Who did the IPO? Who was their law firm? Who were their auditors?

        Hoping for reputational effects may be a doomed enterprise, but unless names are named, then they cannot even function in the abstract.

        Every hopeless SPAC, etc had an investment bank and an auditor…in fact, bad actors tend to turn up again and again.

        Collecting and publishing the names would be a public service.

        • VintageVNvet says:

          +++
          good one cas 10!
          Time and enough to make ALL,,, repeat ALL of the various and sundry and extensive ”private” companies doing the OKs for these obvious rip off type companies either do some serious ”pay back” based on their failures,,,
          OR, just make all of those part of LE, (Law Enforcement )

        • Degobah Smith says:

          You’re right, Cas127, it would be a public service.

          And, in some alternate universe, it would matter. But in our hopelessly corrupt and rigged financial/political system, it wouldn’t. The entire system in the good ‘ol USA is designed to funnel the wealth of a nation to the privileged, connected few; and to create a neo-feudal environment that keeps it going in perpetuity. That’s the game and the sad truth of our time.

        • David in Texas says:

          The auditors were Armanino LLP. I had never heard of them before today.

          None of this can be their fault, since according to their web site, “Our core values shape everything we do” and they are “Wickedly Smart,” “Courageously Connected,” and “Empowered.”

          On the other hand, perhaps investors should have focused more on the “wicked” bit and paid less attention to the rest of the fluff.

        • Bellerian says:

          According to the their 2021 “financial statements”, the auditors were Armanino LLP

        • cas127 says:

          Dagobah,

          While it is difficult to have a *lot* of faith in “reputational effects” post Bubbles 1.0, 2.0, etc (and GS “vampire squid” labelling) the fact of the matter is that plenty of long-standing intermediaries are ushering multiple cohorts into financial woodchippers.

          Those are real people, getting really reamed, repeatedly.

          And just as people would stop buying a defective blender that chopped dozens of people’s hand off, identifying these defective intermediaries can only help.

          You can’t fix stupid or lazy through disclosure, but the arc of evolution bends towards wising up – hell, even CA idiot RE bubble 2.0 has only involved about 60% as many homes (per yr at least) as did Bubble 1.0.

          People seeing other people being sucked into blenders (or woodchippers) does, incrementally, create brand wisdom.

          Anything that can collect and memorialize that brand wisdom is probably a plus for society.

  3. Seba says:

    You gotta try extra hard to lose money running a gambling/lottery outfit. As bad as all the other imploders are, this particular operation takes the cake for me. I mean it’s so ridiculously absurd it’s almost funny, if it wasn’t for the people getting swindled out of their money and the ones losing their jobs that is. Ofcourse, those who ran what sounds like a straight up grift, will probably get to walk away much wealthier than they started and wait to do it all over again in the next boom bust cycle.

    I fail to grasp how this system of ripping people off is beneficial to the US as a whole, is it all the foreign investment that then ends up in new hands and staying in the country?

  4. SnakesInErHairDon'tCare says:

    One is free to choose to consent to a hallucination, but that does not mean One is free from the consequences of their actions during consensual hallucinations.
    (Maybe the trip sitters should find a different calling?)

    Yikes.

  5. Craig Campbell says:

    They deserve the financial equivalent of the Darwin Award.

  6. Kenny Logouts says:

    Are SPAC operators liable to their investors on due diligence concerns?

    Or did this all stack up as “amazon 2.0” as I suspect they all do?

  7. Stanley F Brossart says:

    Maybe they should play the Lotto if they’re looking for that Miracle to Happen.
    But the darkness never goes from some men’s eyes
    Commissars and pinstripe bosses roll the dice
    Anyway they fall, guess who gets to pay the price?
    Money green, or proletarian gray
    Selling guns instead of food today GD

  8. SocalJimObjects says:

    Spoos going up on this news.

  9. Prince Gbanga says:

    The company just announced that their new CEO is Adam Neumann.

    • Rob Waring says:

      LOL, Neuman just got a boatload ($350M) of VC cash for a new venture that goes up against Apartments.com: “Seeking to shake up the apartment industry”………..Talk about the lottery

      • Wolf Richter says:

        The way I see it: He sold 3,000 apartments that he owned to the startup, which is funded by other people’s money, which was one heck of a way to unload these 3,000 apartments all in one fell swoop at the top of the housing market. That guy is smart.

  10. Jan says:

    I think Wolf is too pessimistic here. But maybe the Reddit crowd gets it right.

    • unamused says:

      “I think Wolf is too pessimistic here.”

      Nonsense. No matter how bad things may be, they can always get worse.

      “consensual hallucination”

      Mass psychogenic financial disorder. Like the Mad Gasser of Mattoon or the Tanganyika Laughing Epidemic but induced by avarice. It’s well-established that money can cause mental illness and that mental illness can be contagious, which neatly explains a lot of the behavior of the billionaire class and certain grifter politicians.

      “audited financial statements for the year ended December 31, 2021”

      Audited by whom? Quis custodiet ipsos custodes? Since when do crooked auditors face criminal consequences?

      “leading technology company”

      The ‘blinding with science’ logical fallacy is a popular ruse with the Financial Industrial Complex, useful for suckering the weak-minded. To quote: “Oooh, technology! Gimme gimme!’

      STEM gave you the electric light and modern medicine but it also gave you The Bomb and Couch Potato Syndrome. One must be careful.

      Contrary to the opinion of libertarians, morals and ethics are essential to the existence of society and you can’t base a society on cheating or on rejection of reality, but unfortunately the FIC has long since found honesty and integrity to be unprofitable and has therefore arranged to severely compromise the regulators. It is a fact of human social dynamics that those who lie, cheat, and steal have an enormous advantage over those who do not, and this single fact by itself is expected to ensure the demise of civilization.

      “Yes, the planet got destroyed, but for a beautiful moment in time we created a lot of value for shareholders.”

      • Rob Waring says:

        See “lemmings”……….

      • Depth Charge says:

        “It’s well-established that money can cause mental illness and that mental illness can be contagious, which neatly explains a lot of the behavior of the billionaire class and certain grifter politicians.”

        Kind of like how Bill Gates lives in a 48,000 square foot mansion with 24 bathrooms, yet is so concerned about the environment he just can’t control himself. Having a carbon footprint the size of a 3rd world country has eliminated any shred of credibility he may have had on the subject. “Do as I say, not as I do” is not going over well with the masses.

    • Wolf Richter says:

      Jan,

      Hahahaha, yes I read some of the Reddit stuff on LTRY from 6-8 months ago. “Unlimited growth potential” and going to the moon. This stuff is really hilarious. People cannot possibly be serious when they write this stuff. But maybe they are. That’s what consensual hallucination is all about.

      • rojogrande says:

        Going forward, affirmative consent should be required before engaging in consensual hallucination.

      • SomethingStinks says:

        Unless it is deliberately written to create the “momentum”.

      • Noelck says:

        I have to believe that a lot of these social posts are paid for by third parties so that the investors can unload their shares to the retail investor. Some people actually believe but the original posts are far more nefarious.

  11. HollywoodDog says:

    I don’t know if they had a theme song, but I’d imagine ABBA’s “Take a Chance on Me” to be fitting.

  12. Ben says:

    Reddit crowd I love in terms of using social media to undermine Wall Street. At the same time the companies in the middle of the game of tug of war between shorts and longs may be companies just like lottery.com. In the end when the money evaporates and the doors shut and the employees are not paid then the longs feet suddenly are in the mud pit as well and game over.
    I personally wish the short sales by wallstreet did not exist and that the loans by brokerage houses of the stocks to sell short did not exist as well as all the other loans derivatives etc created by the cash flows of Wall Street did not as well. My belief is that the money flow of Wall Street through these leveraged products including buyouts is counterproductive but I have no evidence of the fact except the case of Lehman brothers bankruptcy.

    • 2banana says:

      Here is the thing.

      If you have a well run company that creates goods/services people want and has a history of making profits…

      Nothing the Reddit crowd does will affect your company more than a very short term.

      • COWG says:

        “ Nothing the Reddit crowd does will affect your company more than a very short term.”

        Children playing with matches…

  13. Ben says:

    Lehman had morphed into a real estate hedge fund disguised as an investment bank.[3] By 2008, Lehman had assets of $680 billion supported by only $22.5 billion of firm capital. From an equity position, its risky commercial real estate holdings were thirty times greater than capital. In such a highly leveraged structure, a three- to five-percent decline in real estate values would wipe out all capital.
    All pushed and sold by Wall Street.
    Rinse and repeat and the Fed bailed out the banks ! Still have the effects in 2022!

  14. AverageCommenter says:

    The thing with speculation is there will always be a new crop of speculators who will show up but are too young to remember what happened to the previous bunch of speculators. 98% of all this NFT crap ain’t gonna be worth anything in the near future. Every generation has to live and learn

    • MiTurn says:

      “Every generation has to live and learn”

      Ergo, the patterns in history — economic and otherwise. Acorns never fall far from the tree.
      :)

  15. perpetual perp says:

    This is the Libertarian legacy. Anti-regulation, anti-government and a grifter Libertarian former President. Not to mention a totally irresponsible polity who voted all these crooks in. Still there, in point of fact.

    • Call it corporate Libertarian, corporations have constitutional rights. Eminent Domain was the key decision. Rand Paul became the spokesman. He once said BP Deepwater Horizon, shouldn’t be sued, because they perform a public service. Now his state, E KY is a flooded mess and its man made, the result of mining company policy. We’ve got sports betting on the ballot in CA and its the Indian tribes trying to carve up the benefits but be sure the candidates aren’t staying out of this. The CA lottery was sold to the voters as the way to fund state education which has gone downhill since. Sinema in AZ just took in a million from private equity, to bust up the corporate tax law clawbacks. I am sure her supporters think that’s okay if she delivers on their agenda. They just had their CO River allotment cut, but there is another flood coming.

      • 91B20 1stCav (AUS) says:

        Ambrose-have always had to shake my head a bit over public perception of state-sanctioned gambling accounting. In the end, it seems most of the money heads to a ‘gaming corporation’, most often located outside of the state those games are located in…

        in CA see the current ad campaign for Prop. 27 as no different than the Uber/Lyft-backed Prop. that purported to aid it’s spear-carriers while actually accomplishing little as possible compared to the profit rakeoff achieved by passage of the Prop…

        (commerce as ‘goods and services, indeed…).

        may we all find a better day.

    • Sam Lowry says:

      Re-read the second-to-last paragraph of the article. There is nothing “Libertarian” about the Federal Reserve. Quite the contrary.

  16. Frank B says:

    Have u done a story on Voyager Digital yet? Crypto company that blew up after lending 3AC $650mm and had to freeze customer withdrawals because they are insolvent. CEO cashed out when he sold $30mm worth of stock last year. Now the stock is worth 25 cent and there’s a class action lawsuit against the CEO and that clown Mark Cuban who pumped this ponzi scheme while the poor customers lost their life savings as the scam evaporated….

  17. Xavier Caveat says:

    This lottery business almost sounds as if Shirley Jackson underwrote it.

    • cas127 says:

      Don’t throw stones.

    • COWG says:

      Q: How do you make money at Lottery.com ?

      A: We make money by being a leading technology company…

      Q: Okay, so how do you make money…

      A: I’m not going to answer such a stupid question…

      Q: So the answer to the question is, you don’t…

      A: I told you already we are a LEADING technology company, you moron… this interview is over….

  18. Mike Taniwha says:

    Wow it sure is looking like the wild west in the stock market here! This reminds of the lead up to the October 1987 crash, I was in New Zealand at the time and all types of hair brain companies where IPOing. They were all gone by 1989.

    You have to ask yourself why these companies even bother filing accounts with the SEC if the SEC are not even bothering to vet these SPAC listings.

  19. OldPaperBoy says:

    Leavenworth is lovely this time of year….

  20. Crush The Peasants! says:

    Cue up The Cult – Liquidity Removal Machine.

  21. Flea says:

    Ultimate fraud,but there’s no consequences. Until sec starts prosecutioning these thieves . At least Len Lay went to jail this will never end .Speak with YOUR money= leave the market .

    • Anthony A. says:

      Ken Lay never made it to jail. He died of a heart attack prior to making the trip. In the Texas Business Hall of Fame, Ken Lay’s wax statue was the first inducted.

      • 91B20 1stCav (AUS) says:

        AA-not to sound conspiratorial (but i will, anyway), as i recall Kenny Boy died and was conveniently ‘cremated’ just when he was supposed to start his incarceration. DNA testing never performed on the remains…

        may we all find a better day.

    • butters says:

      Pull up pull up pull up

      Stonks go green

  22. Brant Lee says:

    I don’t know why some Chinese stocks are being delisted when these spacs behave even worse. The stock market now has a reputation the same as the lottery (well, not that good) and should only be bought/sold in convenient stores.

    Stocks are only good for day trading now and that lone baby is Tesla. Obviously now a pump n dump with wild swings, you can make some huge money or lose your ass.

  23. CreditGB says:

    Here is what I’d like to know, who the heck was the accounting firm who produced the “Audited Financial Statements” of December 2021?

    Billy Bob’s Bookkeeping and Taxidermy Service??

    All those behind these scams need prison time or this will go on and on. Bernie Madoff was just a low level street hustler by comparison.

  24. Mora Aurora says:

    Thanks Wolf for another colorful exposé of th@ econ part of the economy.

    Roll out the wagon, give it a fancy label and from newly plush pulpit, jawbone the heck out of the latest snake oil.

    Nothing new under the sun!

  25. Sean Sean says:

    Powell knows no math, printed another whole Federal Reserve in 1.5 years, and kept ignoring the inflation and strong employment GDP of 10% growth for 1 year. He is just plain RECKLESS. No math brain. Even at today’s 9%, basic economy 101 tells me Powell should have raised rates ALREADY to 9% to match inflation, if he intends to kill it. But he is taking it REAL SLOW? Why?

    My guess is, he would just let Inflation RUN HOT over 3%, as he said many times in the past that it was his intention , so that in another 2 years inflation would slowly comes back down to 4% , and Powell would declare victory. Yeap, he forgot that by then the absolute price would have risen like 50% across 3 years.

    He is playing a mind game here. A hypocrite. Big liar. Just like a LAWYER. Fxck him! Wish him got multiple cancers and rot in hell.

    • Not Sure says:

      I assure you Powell and his army of PhD-holding economists can do math just fine. It’s obvious to any economic layman that printing many trillions of dollars and flooding the economy with those trillions during a time of supply shortages would cause rampant inflation and red-hot speculation. These hype-and-hoopla stocks from Gamestop, to Carvana, to Lottery.com are side effects of it. Occam’s razor applies here. The simplest (and correct) explanation is that everybody at the Fed knows darn well what they are doing, but their motivations do not line up with the needs of regular folks like you and me. They don’t care about you or me. As Carlin said, “It’s a big club, and you ain’t in it!”

      The systemic rot probably runs too deep to ever be fixed at this point… Beyond repair. Even the Fed’s governors were (are) front running their own policy moves. It’s a glaring example of the worst form of insider trading at literally the highest levels, but they walked away with a slap on the wrist. And that’s only the couple of them that got caught in a manner public enough to be laughably “made an example” of. Fed governors walked away without a scratch for actions a million times worse than what Martha Stewart went to prison for! Long story short, financially responsible folks will continue to be punished until none of us exist anymore. This is now clearly an economy built entirely on debt, so those with debt will be rewarded while savers are crushed. Central banks will not stop until every last one of us outside of their club is bound in debt slavery.

  26. Cytotoxic says:

    C’mon you can’t blame them for lying. They literally called themselves ‘lottery.com’. They were quite forthright in their own way.

  27. Seen it all before, Bob says:

    I can see the investor quotes now:

    “I had a boatload of conservative cash sitting in my insured bank account making 0.01% interest. While in a long line for my one lottery ticket per week, I was approached by a friend who told me about this great company lottery.com who would alleviate me from having to stand in line and promised 30% return on investment. I immediately invested half my life savings on this awesome investment. Heck, why leave my comfy sofa at the home when I can make 30% just sitting. If I win the Billion dollar Lottery, even better. “

  28. CreditGB says:

    The three execs each knock down $500k in salaries plus $250k bonus potential. A fourth exec gets $435k with a 30% annual bonus potential.

    Would be nice if these parasites could have eeked out a profit somehow, but hey, that is probably just being picky.

    Well, interpreting what Wolf said, the maggots are wriggling all over this fetid bit of rotting garbage. Volume of 92,500 has it 4%+ upside today. A lucky 92,500 shares got out with at least some pennies to show for it.

    Wonder who the buyers are??

    • COWG says:

      “ Wonder who the buyers are??”

      I’m hoping it was the CNBC 401k fund…

    • Anthony A. says:

      Volume after 1:00 PM today was 635,000 shares traded. Wow! According to NASDAQ, average volume is just over a million shares daily

  29. TK says:

    So I wonder something? How is crypto any different? The only thing I can think of is that bitcoin was simply talked up and people bought in. The fed can increase the supply of cheap money. But people ultimately make the decision to use it to buy nonsense. I guess some people make poor decisions when they have lot’s of money available. Others take advantage of them. What a world.

  30. Xaver says:

    I think most important would be a willing and working SEC and stricter law. SPACS are the garbage but respected corporations are not better. They will just rip off investors in a more elegant way.

  31. CreditGB says:

    Ponzi and Pyramid schemes already have their names.
    These SPAC funded schemes seem to be a hybrid of the two.

    What would be a good moniker for this hybrid I wonder.

    Black holes
    SPAC holes
    Tornado Funds
    Debt tsunami
    SoftBanks
    Fi-Fly Traps

    Nah, none of these quite fit.

  32. CreditGB says:

    At least Ponzi and Pyramid schemes offered some form of repayment bonus. Even fake dividends were at least a “promise of return”.

    These SPAC IPOs appear to make no such promises. Perhaps that is why they are not prosecuted and their insiders placed in prison. After all, they told all investors in their public filings (in most cases) that there were no profits, and that a “reasonable investor” could or should have plainly determined from those filings, that the chances of achieving profits simply do not exist.

    Really, if you think about it, it is a pretty solid legal defense. “We told you we were going to burn your money, and we did, so what’s your complaint?”

  33. Craig J Steele says:

    This only adds to the sadness I feel for the loss of integrity we have been forced to observe in our financial system. America used to stand for something. Can anyone remember what that was?

    • unamused says:

      “America used to stand for something. Can anyone remember what that was?”

      Indigneous genocide and African slavery. It’s never gotten over them, and nobody talks about the labour wars. The FIC has a long and grisly history but it’s fine with promoting nationalist mythologies so long as they can also be exploited.

  34. ru82 says:

    Builders sentiment is pretty bad but the stocks have been doing pretty good the past month.

    I have not seen any layoff announcement from residential home builders yet.

    In 2007 when home builders stocks rolled over, there were layoffs and bad earnings. This time the builders sold off with good profits, good earnings, and no layoffs. Just the expectations that the fed was going to hammer interest rates.

    I see new home inventories increasing a lot. Mortgage applications are down. Where is the pain for the builders except in the stock price?

    Example: CVCO stock dropped 40% at the same time they are having record sales and earnings. Here is their Aug 4 earnings call info. You would wonder why during this time the stock sold off 40% Bizzaro world.

    Cavco Industries Inc (NASDAQ: CVCO) reported first-quarter FY23 sales growth of 78.1% year-on-year to $588.34 million, beating the consensus of $451.08 million.

    Segment Revenue: Factory-built housing rose 83.4% to $572.6 million, and Financial services declined 13.2% to $15.7 million.

    The gross profit jumped 95.5% Y/Y to $144.7 million, with the margin expanding 220 basis points to 24.6%.

    Backlogs rose 26.3% Y/Y to $1 billion.

    EPS of $6.63 beat the analyst consensus of $5.13.

    On May 25, 2022, CVCO’s Board of Directors approved a new $100 million stock repurchase program. The company returned nearly $39 million to shareholders through stock repurchases during Q1, fully utilizing the authorization from October 2020.

    • Gabby Cat says:

      With these numbers, I cannot see any true inflationary numbers eating home builders lunch. Accounting 101 states Money Collected – Expenses = Profit (aka earnings). Those numbers do not look like 18% mark up by builders. They look more like 35%-45%. There use to be a nightly news segment called “Fleecing America” that would call organizations out. If true journalism came back – I imagine a mile long list of offenders.

  35. crazytown says:

    I ran across another hilarious SPAC which trades under the ticker DAVE. They just posted a net loss and also cannot file their 10-Q timely due to misstatement of cash flows in the 2021 10-K and Q1 10-Q. The stock is down over 90% and while they do appear to have a ton of cash and liquidity on hand, their business model is basically to try to make money by giving broke people zero-interest loans. Head-scratching, but makes for some very interesting bedtime reading.

    • CreditGB says:

      Maybe the collect “membership fees” for their 7 million members, who then can elect to lend themselves short term money between pay days.

      When the money can’t be repaid, they just become…”non members”.

      Great business plan!!

      • crazytown says:

        You picked up on some additional hilarity. Their website says they have 10 million members but the press release boilerplate says 7 million. Are they lying on their website, or just incompetent?

    • ru82 says:

      I did a scanner and came across 3 spacs that have raised money a year ago and are still just looking for and opportunity to buy companies. LOL

      • Wolf Richter says:

        There are actually a couple of hundred of them. When they hit their deadline without buying a company, they have to return the money to the shareholders. A lot of them have started doing that.

  36. MF says:

    When small investors believe audited financial statements and lose money: “You should have known better.”

    When small investors stay out of the market because they know it’s all hype and lose out on history’s largest rally:
    “You should have known better.”

    This is how it works. People who were lucky enough to buy a Facebook or an EBay at the right time think it’s because they were so smart.

    Meanwhile, sociopaths are the true smart ones who know it’s all a huge confidence game. They use their talent to lie convincingly, spin a glittering story, extract investment capital (including VCs, it seems) and redirect it into personal accounts.

    They *enjoy* the fact that it leaves a bunch of bag holders behind when the hype vanishes like fog in the afternoon sun. It is black-and-white proof that they are better than you.

  37. Depth Charge says:

    This is what a world awash in printed money looks like. Jerome Foul should have been fired and dragged out by his ear long ago.

  38. ng says:

    Wall Street mafia runs the show

  39. BuySome says:

    John Public, John Law, John Bank, John Smallberries, John Big Booty, John Tech…so many Johns on this corner, can’t we just wrap it all together into YoYoDyne Industries-“Building a Better Future for All-most All Johns with Johnny Cabs available to get you between Johns.” Johnny Reb need not apply.

    • 91B20 1stCav (AUS) says:

      Buy-that would lie far beyond this dimension…

      may we all find a better day…

  40. sunny129 says:

    July Fed minutes released to day:

    Same wishy-washy dovish Fed talking hawkish.
    ——–
    The best summary comes from Steve Chiavarone of Federate Hermes who said the Fed is trying to have it both ways:

    “On the one hand they are calling inflation unacceptably high and inflationary pressures broad-based. On the other they are hinting at slowing the pace of rate hikes, thus allowing financial conditions to ease, well before there is any real evidence of a meaningful move back towards there 2% target. This leaves the market confused as to whether the Fed is likely to continue to raise rates well into 2023.”

    Forked tongue ‘confusing’ speech continues!

    • Wolf Richter says:

      “This leaves the market confused as to whether the Fed is likely to continue to raise rates well into 2023.”

      It only confuses people who refuse to acknowledge what the Fed ACTUALLY says, who keep dreaming about a “pivot.”

      No one else is confused by what the Fed says. It’s clearer than daylight: Rate hikes until they get to somewhere around 4%, then a pause at that level to let monetary policy do its thing because there is a lag of 12-18 months between changes in monetary policy and inflation reacting to it. And then, if inflation isn’t coming down, more rate hikes.

      • Depth Charge says:

        Why would they stop at 4% with inflation running well over 8%? That would seem to me why the market is blowing off the FED, because they would have to raise ABOVE the level of inflation to snuff it out.

        I know you understand this, I’m just stating the obvious. I can honestly see how the market is interpreting the FED as light on inflation, because they are. The fed funds rate is a JOKE compared to the rate of inflation. I think it’s funny that the market is ignoring the FED and the bubbles keep growing.

        The FED has ZERO credibility left.

        • Gattpardo says:

          Depth, it’s NOT running at 8%. It ALREADY RAN at 8%. That’s water under the bridge. Current inflation (meaning since last month), core, appears to be around 3.2%.

          The Fed is not going to allow deflation, no matter what, so that 8% that’s baked into today’s prices is here to stay, period. Now it’s all about not letting future prices rise at a rate >2% (or whatever). That doesn’t take 8% FFR (probably!). And you don’t use 8% FFR to fight 3.2% core inflation. If you did, you’d be always way way way lagged, fighting the last war. We (they) already lost that war.

          This is apparently very hard for many to understand.

        • Wolf Richter says:

          I said before that CPI will likely dip in the second half (for reasons that are already in the can). And it will likely pick up again in 2023. But no one knows where this is going. This inflation has thrown a lot of curve balls. So it makes sense to get to a certain point and wait and see what happens.

          There is also QT which will ramp up to full speed in Sep. Draining liquidity is harsh medicine. Last time (2018), it took six months or so before markets started cratering. And QT started much slower. I’m not even counting the first two months of QT last time which were so slow that they weren’t even visible. This time, everything is bigger and faster. So will see.

          I think 4% and QT is reasonable at this point for a period of observation. And more hikes if it doesn’t get inflation down enough. This lag of 12-18 months between changes in monetary policy and inflation is tricky to deal with because you don’t really know what monetary policy is doing to inflation until it’s too late.

          That’s starting to be my theory too about the surge in inflation in early 2021. Why in early 2021? Because that was within the lag of 12-18 months of the huge beginning of QE in March 2020. With these things, everything is fine, until suddenly it isn’t.

        • Gattopardo says:

          “I said before that CPI will likely dip in the second half (for reasons that are already in the can). And it will likely PIck up again in 2023. But no one knows where this is going. This inflation has thrown a lot of curVe balls. So it makes sense tO geT to a certain point and wait and see what happens.”

          I see the subliminal message in your language, Wolf.

        • Depth Charge says:

          “Depth, it’s NOT running at 8%. It ALREADY RAN at 8%. That’s water under the bridge. Current inflation (meaning since last month), core, appears to be around 3.2%.”

          This is fools’ logic. You cannot predict what future CPI will be. It could drop a little, then spike again at 11% in 3 months or something. ASSuming it’s dropping and never going back up is like magical thinking or something. Of course the CPI stats are always backward looking, because they are based upon collected data from the past.

        • Gattopardo says:

          Right, DC, so then what’s your solution at this point?

        • Depth Charge says:

          “Right, DC, so then what’s your solution at this point?”

          Here’s me as the FED Chair at the next meeting, addressing the public:

          “We were hopeful through our language and actions over the course of the past several months that the markets would understand and take seriously our efforts to combat inflation, and react accordingly. That hasn’t been the case, and things actually look to be regressing, partly buoyed by baseless rhetoric about a so-called “FED pivot.”

          In light of such bewildering circumstances, we are now raising the fed funds rate by 500 basis points this meeting. This will put the fed funds rate just shy of 8%, and hopefully send the message we wanted the markets to understand in the first place. Also on the table is another 500 basis point rate hike next meeting. Further, we have decided to unload our entire portfolio of mortgage backed securities over the course of the next 3 months, to be completed by December 31, 2022, to also send a message that QT is real, for all the deniers out there.

          Thank you for coming.”

        • Seen it all before, Bob says:

          DC,

          I think you may not keep your job.

          However, I’d recommend pulling all of your multi-million dollar investments into gold or cash before your Press Conference. It’s the American Way.

  41. Gabby Cat says:

    SOX compliance is the name of the game in my world. Many individuals, new hires under 35, do not know the story of Enron or WC. They assume the SEC does this to protect investors without justification. Honestly, they complain about the paperwork until I give them a history lesson. They are thankful for the insight once they see how it affects their retirement. This current story reminds me of the history behind SOX. However, this organization looks as if it is not regulated by SOX. Am I understanding correctly? Is there any other governance that protects this kind of counterfeit behavior? Or are laws not being enforced (like the obvious monopoly laws)? I am confused!

  42. Gattopardo says:

    “I said before that CPI will likely dip in the second half (for reasons that are already in the can). And it will likely PIck up again in 2023. But no one knows where this is going. This inflation has thrown a lot of curVe balls. So it makes sense tO geT to a certain point and wait and see what happens.”

    I see the subliminal message in your language, Wolf.

  43. Squeeze says:

    Why don’t you be more neutral and cover bbby too? Also, how are you feeling about the recent >50% recovery of the markets? Still holding onto your shorts?

    • Wolf Richter says:

      Squeeze,

      Apologies for not covering BBBY. So here’s my coverage of BBBY: Shares collapsed 29% Thursday morning, and by 38% from yesterday’s high, after a spectacular meme scam trade blew up, as it has done before, such as in Aug 2021; in March 2022, when BBBY collapsed 85% from $30 to $4.50; and now, starting yesterday afternoon.

      • Seen it all before, Bob says:

        Can I still buy towels to mop up my tears?

        Seriously, the Apes are battling the Wall Street suits. Best not to get involved with this since my suit is too small and I am too busy with a job to be a anything more than a chimp.

        • Seen it all before, Bob says:

          We still have our Wedding Registry towels from BBY from 30 years ago.

          Great towels! Many tears have been soaked up with the market and marriage during this time. They saved us.

      • Wolf Richter says:

        Squeeze,

        To update my coverage of BBBY: afterhours, BBBY plunges another 42% to $10.81 at the moment. Kathoomph.

        In 26 hours, BBBY has collapsed by 58%.

        This meme trader nonsense is just a shitshow, TBH.

  44. CreditGB says:

    Now I’m confused about exactyl who and what is the “market.”

    On the one hand, we see articles about SPAC “investors” getting their butts handed to them based on hyped, and fake reporting from these cash furnaces burning their “investments”.

    Are these “investors” not the “market” too? Yet we seem to hang on what the “market” perceives the Fed is up to? A bit like relying upon the whims of lunatics.

    I’m probably much to pessimistic about the “market investor” as a whole. Back to my corner.

  45. Rico says:

    Will the economy work without the Fed and government throwing money at it ? It ain’t going to be pretty.

  46. Depth Charge says:

    22 years of the Gramm-Leach-Bliley Act and just look at the damage, yet nothing but CRICKETS from CONgress about the carnage they wrought from such a reckless, impossibly corrupt move.

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