The Bear Cave #105

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

Feb 20, 2022

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New Activist Reports

Spruce Point Capital published on C3.ai Inc (NYSE: AI — $2.23 billion), an enterprise AI software company. Spruce Point alleged the company “has a pattern of exaggerated business claims and is using multiple strategic partnerships… to project an aura as a successful enterprise.” Spruce Point noted that the company has repeatedly changed its definition of a “customer” and that a partnership with Baker Hughes accounts for over 30% of sales. In addition, Spruce Point highlighted the company has had three different CFOs since its September 2020 IPO, and the current CFO was previously the CFO of Telenav, which later restated revenue figures.

Night Market Research published on Zynex Inc (NASDAQ: ZYXI — $271 million), a medical device company focused on electrotherapy. Night Market noted a letter to patients that showed UnitedHealthcare “is removing Zynex from its network effective February 15.” Night Market believes UnitedHealthcare is responsible for over half the company’s EBITDA. In addition, Night Market highlighted litigation showing that Zynex allegedly overbilled customers and called the company “uninvestable.”

White Diamond Research published a new report on authID (NASDAQ: AUID — $130 million), an identity verification company. White Diamond alleged the company has been misrepresenting and falsifying partnerships to investors. For example, in its earnings call and investor presentation, authID called CU NextGen a "key partner." However, White Diamond conducted a secretly recorded phone call with CU NextGen’s CEO who said, “I don’t have a partnership… I don’t even know them off the top of my head.”

Recent Resignations

Notable executive departures disclosed in the past week include:

CEO of Allied Esports Entertainment (NASDAQ: AESE — $70 million) resigned after seven months. The company has also had three different CFOs over the last three years and has fallen over 80% since its August 2019 SPAC merger.
CFO of Kilroy Realty Corp (NYSE: KRC — $8.26 billion) “notified the company that she had accepted a new employment opportunity” after a little over one year.
CEO of Quantum-Si Inc (NASDAQ: QSI — $606 million) resigned “in order to pursue opportunities outside of the company” after a little over a year. The company has fallen around 55% since its June 2021 SPAC merger.
CEO of Finance of America Companies Inc (NYSE: FOA — $215 million) “informed the company of her intention to retire” after one and a half years. The company has fallen over 60% since its April 2021 SPAC merger.
CEO of Adagio Therapeutics (NASDAQ: ADGI — $714 million) “agreed in principle to resign from his position” after a little less than two years. The company has fallen nearly 70% since its August 2021 IPO.
CFO of KnowBe4 Inc (NASDAQ: KNBE — $3.37 billion) resigned after three and a half years. The Clearwater, Florida-based company has fallen about 15% since its April 2021 IPO.
Vikas M. Keswani resigned from the board of Redbox Entertainment (NASDAQ: RDBX — $90 million) after just four months. The company had fallen over 80% since its October 2021 SPAC merger.
Chief Lending Officer of RBB Bancorp (NASDAQ: RBB — $503 million) resigned after one year. The company is audited by Eide Bailly LLP.
Chief Accounting Officer of Vontier Corp (NYSE: VNT — $4.14 billion) resigned after one and a half years “to pursue another employment opportunity.” The company has fallen nearly 30% since its September 2020 IPO.
Chamath Palihapitiya resigned as Chairman of Virgin Galactic Holdings (NYSE: SPCE — $2.17 billion) “to pursue other opportunities” after a little over two years.

Data for this section is provided by InsiderScore.com

What to Read

“Idea Brunch with Dave Waters of Alluvial Capital” (Sunday’s Idea Brunch)

“When considering any microcap security, I like to ask two questions. 1. Why is this company so small? and 2. Why is this company public? If a company has been around for several years but still struggles to generate growth and profits, perhaps something about the company is fundamentally flawed. Similarly, private equity and larger companies routinely snap up smaller companies to bolster their growth or earn a financial return. Why hasn’t anyone bought this company? Could be because it’s not worth buying…”

“How a Small Alabama Company Fueled Private Equity’s Push Into Hospitals” (WSJ)

“MPT said it has around 120 employees. Birmingham airport records show it also had three Gulfstream jets in a hangar there…. The Federal Aviation Administration later provided flight records to The Wall Street Journal showing that over the last three years the jets made 141 trips between Birmingham and Fairhope, Ala., where public records show Mr. Aldag owns a waterfront home on Mobile Bay.”

In June 2021, The Bear Cave also published an investigation on Medical Properties Trust and concluded,

“Medical Properties Trust is fighting the political winds of a more accountable healthcare system and could face serious pressure should one of its large tenants default and leave behind poorly maintained facilities at non-market rents.”

“Justice Department Targets ‘Spoofing’ and ‘Scalping’ in Short-Seller Investigation” (WSJ)

“Federal prosecutors are investigating whether short sellers conspired to drive down stock prices by sharing damaging research reports ahead of time and engaging in illegal trading tactics, people familiar with the matter said.”