The Bear Cave #102

New Activist Reports, Recent Resignations, and Tweets of the Week

Jan 30, 2022

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New Activist Reports

Bleecker Street Research published on Daqo New Energy Corp (NYSE: DQ — $2.64 billion), a Chinese producer of polysilicon used for solar panels. Bleecker Street alleged that the company relies on slave labor from Uyghur concentration camps. As evidence, Bleecker Street pointed out that Daqo New Energy has operating margins twice that of competitors, received subsidies for “labor transfers,” and was added to a U.S. Department of Commerce blacklist for “accepting or utilizing forced labor.” In addition, Bleecker Street Research alleged that JinkoSolar (NYSE: JKS — $1.86 billion), Daqo’s second-largest customer, also uses forced labor. Bleecker Research found local news reports covering JinkoSolar’s reliance on ethnic minorities and published a satellite photo showing JinkoSolar’s proximity to an Uyghur labor camp.

Daqo Energy’s second-largest shareholder was previously sentenced to five years in prison for market manipulation, the company’s fourth-largest shareholder is the Invesco Solar ETF, and many of its largest shareholders are ESG focused funds.

Bleeker Research concluded,

“Propelled by forced labor… Daqo has ascended far beyond its origins as a tiny producer of a volatile commodity. It is one of the largest polysilicon producers in the world, and it’s the lowest cost producer, a feat we hope you understand now how it was achieved… Jinko has a prison on its corporate campus, and yet both of these companies have benefited from the proliferation of ESG investments. As global energy is focused on this region, we expect more bad outcomes and more bad headlines.”

A researcher using the pseudonym “Shifty the Rat” published on BATM Advanced Communications (London: BATM — GBP261 million), a British telecommunications and ventilator company. “Shifty the Rat” alleged the company’s recent financial success is from a one-time increase in demand for ICU ventilators and highlighted excessive related party transactions and accounting abnormalities. For example, the company announced it sold a subsidiary for $33 million, but then only received $19 million. In addition, the company paid part of a $4.8 million “distributor commission” to a car showroom company affiliated with BATM’s founder and CEO.

Viceroy published a brief response to management on S&T AG (XTRA: SANT — EUR1.08 billion), an Austria-based roll-up of IT services. Viceroy previously questioned the company’s use of off balance sheet structures to conceal bad assets and called on management to release the full findings of Deloitte’s ongoing investigation.

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of GoHealth (NASDAQ: GOCO — $837 million) resigned after just 48 days “to pursue other business opportunities.” In August 2021, Rahm Emanuel resigned from the company’s board “due to his nomination by President Biden to serve as the Ambassador to Japan.” The company has fallen nearly 90% since its July 2020 IPO.
CFO of Ikena Oncology (NASDAQ: IKNA — $339 million) resigned after eleven months “to pursue other professional opportunities.” The company has fallen 70% since its March 2021 IPO.
CFO of Casa Systems (NASDAQ: CASA — $352 million) resigned after one and a half years and “is leaving the Company to attend to family issues.” The company has had four different CFOs over the last five years. In August 2020 the company “dismissed” PwC as its auditor and hired Ernst & Young.
CFO of ICF International Inc (NASDAQ: ICFI — $1.74 billion) resigned after two years “to pursue new opportunities.” The company is audited by Grant Thornton LLP.
CFO of L3Harris Technologies (NYSE: LHX — $42.9 billion) resigned after two and a half years “to pursue career opportunities outside of L3Harris.”
CFO of iQIYI Inc (NASDAQ: IQ — $2.72 billion) “retired due to personal reasons” after nine years. In April 2020, Wolfpack Research suggested the company could be inflating revenue, user metrics, profits, and cash. The company has fallen over 80% in the last year.
President of Proterra’s Transit Division (NASDAQ: PTRA — $1.56 billion) resigned after six months. Last year the company’s CEO and CFO also resigned, and the company has fallen roughly 30% since its January 2020 SPAC merger.
CytoDyn Inc (OTC: CYDY — $345 million) “terminated the employment of the Company's President and Chief Executive Officer, Nader Z. Pourhassan, Ph.D., and removed him as an officer of the Company” after nine years. The company has had four different CFOs in the last five years and last month a board member resigned after only 21 days. In 2006, Dr. Pourhassan was convicted of a felony domestic violence court order violation and in 1986 was “convicted of a third-degree felony of theft by deception for overdrawing his bank account by approximately $100.”

Data for this section is provided by InsiderScore.com

What to Read

“Dispute Between Apollo Co-Founders Black, Harris Boils Over” (WSJ)

“‘The firm has never been more aligned or better positioned to create value for all of our stakeholders,’ an Apollo spokesman said. ‘The legal dispute playing out between two former employees is unfortunate but won’t impact our strategy, businesses, or mission.’”

“An Entrepreneur’s Perspective – Building the Future of Technology” (Raging Capital Ventures)

“I am excited to interview Steve Papa for this issue of An Entrepreneur’s Perspective. Steve is one of the most accomplished serial entrepreneurs of our time… Steve’s first big win was Endeca, an enterprise search engine company focused on e-commerce that he started in Boston in the late 1990’s.”

“Idea Brunch with Porter Collins of Seawolf Capital” (Sunday’s Idea Brunch)

“I took a job with Steve Eisman in 2003 which at the time was paying 50% less than my current job, but I was taking a chance on myself. Obviously, that turned about to be a fantastic move. My partner Vincent Daniel and I learned a ton from Steve over the 10+ years we worked with him. Both of us could spend hours telling stories about managing capital through the financial crisis with Steve and Danny Moses. The culture Steve fostered was electric. With Steve, Danny and the other incredible personalities on our team, every day at FrontPoint felt like an episode of Curb Your Enthusiasm.”