The Bear Cave #108
New Activist Reports, Recent Resignations, Stocks to Watch, and Tweets of the Week
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 reply with any feedback.
New Activist Reports
Hindenburg Research published a 13,991-word investigation into Natera (NASDAQ: NTRA — $3.72 billion), a genetic testing company primarily focused on women’s health. Hindenburg called the company a “pioneer in deceptive medical billing” and wrote,
“Based on more than two dozen interviews with former Natera employees, patients and industry experts, a review of hundreds of online complaints, FOIA requests to state Medicaid offices and state Attorneys General, and the company’s financial filings, we show how Natera’s revenue growth has been fueled by deceptive sales and billing practices aimed at doctors, insurance companies and expectant mothers.”
Hindenburg found that the company paid $11 million to settle Department of Justice allegations of improper billing in 2018 and alleged the company created a fake non-profit “My Genome My Life” to offer doctors free prior authorization for Natera tests billed to insurance companies. In addition, Hindenburg alleged the company dramatically increases patient bills by adding often unnecessary screens for “microdeletions.” According to a New York Times report cited by Hindenburg, these tests often generate false positives and led parents to abort healthy babies. In addition, Hindenburg published numerous complaints from patients who have called Natera’s business practices “pure stealing” and “absolute fraud.”
Natera said it “[disagrees] with the accuracy of this report which was generated in an attempt to make a quick profit by short-sellers Hindenburg Research.” The company fell over 30% this week following Hindenburg’s report.
Night Market Research published on Zentek (TSXV: ZEN — CAD$273 million), a Canadian mining company that pivoted to nanotechnology for face masks. Night Market Research highlighted litigation that claims the company stole its primary technology and questioned Zentek’s medical expertise given that the company’s “head of science and research” is a former pastor with a doctorate in Ministry. Night Market Research called the company “uninvestable.”
Recent Resignations
Notable executive departures disclosed in the past week include:
Renee Noto, a board member of QualTek Services (NASDAQ: QTEK — $173 million), submitted a one-sentence resignation letter to leave “effective immediately” after just 47 days. The company has fallen over 70% since its merger with the Roth Acquisition III SPAC one month ago.
CFO of Bluebird Bio (NASDAQ: BLUE — $313 million) resigned after five months.
CFO of Berkeley Lights (NASDAQ: BLI — $346 million) resigned after one year “to pursue another opportunity outside of the biotech industry.” Scorpion Capital criticized the company in September 2021 for dubious data and “newly-invented words and drivel it uses to describe itself.” Shares are down over 90% since the company’s July 2020 IPO.
CFO of Rocket Pharmaceuticals (NASDAQ: RCKT — $1.01 billion) resigned after a little over one year “due to personal reasons.” The company has had four different CFOs over the last three years and is audited by EisnerAmper LLP.
CEO of Interface Inc (NASDAQ: TILE — $765 million) stepped down from his second stint as CEO after a little over two years.
CEO of Bank of New York Mellon (NYSE: BK — $40.4 billion) “intends to retire” after two and a half years. The company has had four different CEOs in the last five years last month two board members announced they were not seeking re-election.
CEO and CFO of Yext Inc (NYSE: YEXT — $775 million) resigned after 16 years and 8 years. In February 2020, The Bear Cave’s author, Edwin Dorsey, criticized the company for “perceived extortion” and governance issues. Shares have since fallen over 60%.
Chief Operating Officer of NeoGenomics (NASDAQ: NEO — $1.97 billion) “retired” after nine months. The company has had four different CFOs in the last five years and in January a board member resigned effective immediately.
Principal Accounting Officer of Fulcrum Therapeutics (NASDAQ: FULC — $651 million) resigned two months after transitioning into that role.
Chief Accounting Officer of APi Group (NYSE: APG — $4.74 billion) resigned after eleven months. The company’s CFO also “retired” in September 2021 and the stock has more than doubled since its May 2020 SPAC merger.
Chief Accounting Officer of Mohawk Industries (NYSE: MHK — $8.53 billion) resigned after eleven months “to pursue another opportunity.” The company has had four different CFOs over the five years.
Chief Accounting Officer of CrossAmerica Partners LP (NYSE: CAPL — $761 million) “retired” after six months. The company has had six different CFOs over the last five years and is audited by Grant Thornton.
Data for this section is provided by InsiderScore.com
Stocks to Watch: Vail Resorts (MTN) and Celsius Holdings (CELH)
Tomorrow after the close, Vail Resorts (NYSE: MTN — $9.77 billion) reports financial results for its fiscal second quarter ended January 31, 2022. They may disappoint.
The Bear Cave previously highlighted numerous consumer complaints with the company’s all-you-can-ski Epic Pass and widespread sentiment shifts towards competing products. Vail Resorts missed revenue projections on its most recent earnings report and the company’s new CEO said its guidance “assumes normal weather conditions… and no impact from incremental travel or operating restrictions associated with COVID-19 that could negatively impact our results.”
In its first paid subscriber investigation from October 2020, The Bear Cave published on Celsius Holdings (NASDAQ: CELH — $3.38 billion) and wrote,
“Celsius Holdings is a company like no other. The company allegedly makes healthy energy drinks and its stock is up nearly 900% in the last five years. Its investors include indicted bankers involved in 1MDB, hip-hop producer Russell Simmons, and a shark from Shark Tank. The company uses an auditor not used by any other NYSE or NASDAQ listed company and has told the SEC it does ‘not expect that our disclosure controls or internal controls will prevent all error and all fraud.’”
Since then, Celsius has upgraded its auditor from Assurance Dimensions to Ernst & Young. Two weeks ago, the company, filed a “notification of inability to timely file Form 10-K” due to “staffing limitations, unanticipated delays and material errors in previous filings.” Celsius has until Tuesday, March 15 to meet its extended filing deadline. The Bear Cave is skeptical.
In April 2021, the company wrote a comment letter response to the SEC about potential share issuances and returns to an Asian affiliate. The SEC told Celsius “please more fully explain to us how you determined your accounting and presentation is appropriate.”
In its May 2021 10-Q, Celsius added a new risk factor that read, in part, “We must maintain additional disclosure controls procedures with respect to acquisitions… there are specific technical rules, compliance with which are necessary to provide proper disclosures to the users of the financial statements.”
In November 2021, Celsius disclosed receiving a subpoena from the SEC Division of Enforcement “to determine whether violations of the federal securities laws have occurred.”
One week ago, the company posted a job opening for a new “Director of Internal Audit” in Boca Raton, Florida. That job remains open.
What to Read
“SEC Awards Approximately $14 Million to Whistleblower” (SEC)
“The Securities and Exchange Commission today announced an award of about $14 million to a whistleblower who published an online report exposing an ongoing fraud. The whistleblower, who days later shared the same information with the SEC and was persistent in reaching out to the staff, prompted the opening of an investigation which resulted in a successful enforcement action and the return of millions of dollars to harmed investors. “
“Chinese Stocks Plunge After SEC Stokes Delisting Concerns” (WSJ)
“A further step by the Securities and Exchange Commission toward forcing companies from China off American exchanges helped trigger the worst decline in U.S.-listed Chinese stocks since the global financial crisis, and sparked a selloff in Hong Kong.”
“U.S. Probes Options Trade That Gained on Microsoft-Activision Deal” (WSJ)
“Federal prosecutors and securities regulators are investigating large bets that Barry Diller, Alexander von Furstenberg and David Geffen made on Activision Blizzard Inc. shares in January, days before the videogame maker agreed to be acquired by Microsoft, according to people familiar with the matter.”
Tweets of the Week
Until Thursday,
The Bear Cave