The Bear Cave #104

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

Feb 13, 2022

Welcome to The Bear Cave — your weekly source of short-seller news. If you are new, you can join here. Please hit the heart button if you like today’s newsletter and check out our sister publication, Sunday’s Idea Brunch, for educational interviews with great investors.

New Activist Reports

“ManBearChicken” published on Porch Group (NASDAQ: PRCH — $850 million), a home services software company that went public through a SPAC in December 2020. ManBearChicken highlighted that the company “has been around for 10 years in search of a sustainable model, struggled to raise money in the private markets in a frothy VC environment, and had a going concern warning before the SPAC merger.” The anonymous author also claimed Porch’s core “concierge” team is actually an outsourced group of independent contractors in Mexico who use potentially illegal tactics to generate leads. ManBearChicken previously was a whistleblower on chicken companies engaged in illegal price-fixing and the author recently launched a Substack newsletter.

Spruce Point Capital previously highlighted a misleading CEO biography and potentially aggressive accounting at Porch in April 2021, and in August 2021 two SPAC sponsor board members resigned after short tenures.

Sumerian Research published a Twitter thread on Regencell Bioscience Holdings (NASDAQ: RGC — $465 million), a Hong Kong-based experimental medicine company with questionable efficacy and related party conflicts.

Doomberg published bullishly on MP Materials Corp (NYSE: MP — $7.12 billion), a Nevada-based rare metals mining company. Doomberg pushed back on criticism from Bonitas Research and Grizzly Research about related-party dealings with a Chinese customer. Doomberg pointed out that the related-party contracts were disclosed properly and one industry expert called the allegations “unsubstantiated, rehashed garbage.” Doomberg has no position in MP stock, but instead wrote that “our interest in the company stems from our longstanding position that certain critical materials are worth producing domestically.”

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of Archaea Energy (NYSE: LFG — $1.89 billion) resigned after ten months. The company merged with a SPAC in September 2021.
CFO of Benson Hill Inc (NYSE: BHIL — $479 million) resigned after a little over a year. The company has fallen nearly 75% since its September 2021 SPAC merger.
CFO of Cerence Inc (NASDAQ: CRNC — $1.70 billion) resigned after two and a half years. Two weeks ago, the company’s general counsel resigned and the company’s CEO resigned in December.
CFO of Vimeo Inc (NASDAQ: VMEO — $2.14 billion) resigned after two and a half years. The company is down nearly 80% since its May 2021 IPO.
CFO of National Energy Services Reunited (NASDAQ: NESR — $930 million) “is leaving the company to start another role” after a little under three years. The company went public via SPAC in 2018.
CFO of Enphase Energy (NASDAQ: ENPH — $19.7 billion) “is retiring for personal reasons” after three and a half years. In June 2020, Prescience Point Capital Management alleged the company “fabricated” revenue figures.
CEO of Peloton Interactive (NASDAQ: PTON — $11.5 billion) resigned after nine and a half years.
Executive Chairman of CareMax Inc (NASDAQ: CMAX — $546 million) resigned after eight months. The company is down 40% since its December 2020 SPAC merger.
Executive Chairman of ContextLogic (NASDAQ: WISH — $1.45 billion) resigned after nine months. The company is down 90% since its December 2020 IPO.
Chief Medical Officer of Editas Medicine (NASDAQ: EDIT — $1.10 billion) “was terminated effective immediately” after a little over one year.
Chief Accounting Officer of Starbucks (NASDAQ: SBUX — $108 billion) is “taking an unpaid sabbatical leave from the Company (also known as a Starbucks ‘Coffee Break’).” The company has had four different CFOs in the last ten years.

Data for this section is provided by InsiderScore.com

What to Read

“Are Activist Short Sellers Misunderstood?” (NYT)

“Those beliefs have also led critics of activist short sellers to propose S.E.C. rules that they say would stem such abuses. These include forcing the activists to hold their positions for at least 10 days or, failing that, to disclose when they cover their shorts. Some have petitioned the S.E.C. to change the rules so that rapidly closing a short position can be considered a form of market manipulation.”

“This Small Arkansas Bank Is Fueling America’s Skyscraper Boom” (WSJ)

“The most prolific lender to Manhattan property developers isn’t Wells Fargo & Co. or Citigroup Inc. or any of the other big global banks. It is Bank OZK, which not that long ago was an obscure lender from Little Rock, Ark.”

“Idea Brunch with Michael Fritzell of Asian Century Stocks” (Sunday’s Idea Brunch)

“On a related note, I think you’re making a mistake if you allocate capital to the Asia-Pacific region purely for exposure. If you want to take an index approach, perhaps stick to democracies with property rights and the rule of law. Companies in such markets tend to have a higher return on capital.”