The Bear Cave #110
New Activist Reports, Recent Resignations, Stock to Watch, and Tweets of the Week
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New Activist Reports
Blue Orca Capital published on Li-Cycle Holdings (NYSE: LICY — $1.29 billion), a Lithium-ion battery recycling company. Blue Orca called the company “a fatal combination of stock promotion, brutal governance, a broken business and Enron-like accounting.” For example, the company’s chairman “is a serial penny stock promoter recently banned from serving as a director of any TSX Venture company” and the company spent $86,000 on marketing gifts from the CEO’s family business that makes wallets, bags, and beer holsters. Blue Orca noted that the company sells “100% of its recycled black mass to Traxys,” a major investor that acts as a broker between Li-Cycle and its end customers. Blue Orca alleged the arrangement allows Li-Cycle to “pull sales forward from future periods and [recognize] revenues based on its self-serving estimates.” Li-Cycle’s CFO and auditor both resigned recently and Blue Orca estimated the company will need to raise around $1 billion to fund operating losses for the next five years.
Li-Cycle stock fell 17% this week and is down 21% since its August 2021 SPAC merger. Blue Orca’s founder, Soren Aandahl, also did a Zer0es TV interview about the company.
NINGI Research published on Sono Motors (NASDAQ: SEV — $360 million), a German electric vehicle company. NINGI Research alleged that Sono Motors, which adds solar panels to its prototype cars, “does not have a viable product” and has had customer cancellation rates in excess of 30%. NINGI Research also noted that the company raised money from several crowdfunding campaigns instead of traditional venture capital. Sono Motors is down nearly 80% since its November 2021 IPO.
J Capital Research published bullishly on Firefinch (ASX: FFX — AUD$1.13 billion), an Australian gold and lithium miner. J Capital Research highlighted that the company’s lithium mine, based in Mali, is being undervalued “due to political risk” and that electric car battery demand and an upcoming spinoff of the lithium assets will create value. In addition, J Capital wrote favorably on the company’s gold assets including one mine nicknamed “Morila the Gorilla.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Privia Health Group (NASDAQ: PRVA — $2.72 billion) resigned after a little over two months. The company is down 30% since its April 2021 IPO.
CEO of PS Business Parks (NYSE: PSB — $4.49 billion) resigned after a little under one year “for health reasons.” The company has had four different CEOs and five different CFOs in the last five years.
CFO of AllianceBernstein (NYSE: AB — $4.57 billion) departed after a little over one year to become CEO of Janus Henderson Group (NYSE: JHG — $5.91 billion).
CEO of Cronos Group (NASDAQ: CRON — $1.60 billion) “retired” after one and a half years.
CFO of Protagonist Therapeutics (NASDAQ: PTGX — $1.21 billion) resigned after a little under three years. The company also switched auditors in March 2020.
CFO of OppFi (NYSE: OPFI — $413 million) resigned after five years. The company is also on its third CEO since its July 2021 SPAC merger and shares have since fallen nearly 70%. The Bear Cave previously criticized the company for misleading customers, dubious reviews, and excessive interest rates.
Chief Accounting Officer of Hydrofarm Holdings Group (NASDAQ: HYFM — $727 million) resigned “effective immediately.” The company is down nearly 70% since its December 2020 IPO.
Chief Operating Officer of Riot Blockchain (NASDAQ: RIOT — $2.43 billion) “entered into a separation and release agreement” after one year. The company has had six different CEOs and four different CFOs in the last five years. The company is audited by Marcum LLP.
Chief Business Officer of Alignment Healthcare Inc (NASDAQ: ALHC — $1.97 billion) “entered into a separation agreement” after a little over one year. The company is down 40% since its March 2021 IPO.
Chief Technology Officer of Vivint Smart Home (NYSE: VVNT — $1.50 billion) resigned after a little over two years. The Utah-based company has fallen around 25% since its January 2020 SPAC merger.
Chief Accounting Officer of Avid Technology (NASDAQ: AVID — $1.59 billion) resigned after almost two and a half years. The company is up over 600% in the last five years and is audited by BDO LLP.
Principal Accounting Officer of Roblox (NYSE: RBLX — $27.7 billion) resigned after a little over one year as a result of “a personal decision.” The Bear Cave previously criticized Roblox for widespread child abuse on its platform. In addition, The Bear Cave highlighted issues around safety, spending, and governance and Roblox called The Bear Cave “wholly misleading, false, and irresponsible.”
Data for this section is provided by VerityData from VerityPlatform.com
Stock to Watch: Power REIT (PW)
On Tuesday, Paula Poskon resigned from the audit committee of Power REIT (NYSE: PW — $148 million), a Real Estate Investment Trust focused on greenhouses for “food and cannabis cultivation,” solar farms, and transportation. Her resignation letter is interesting.
Ms. Poskon wrote,
“I am writing to tender my resignation effective immediately… during my tenure, and particularly after the company began a growth strategy through related-party transactions, I encountered increasing reluctance to undertake the kind of holistic review of corporate governance that would allow the company to adopt and implement best practices. Further, within the past month, Chairman and CEO David Lesser, together with other members of the board, retaliated against me for making such efforts.”
Ms. Poskon’s letter continues, in part,
“On March 4, 2022, the members of the audit committee passed resolutions to engage independent outside counsel to provide a refresher on our fiduciary duties… shortly thereafter I experience the following retaliatory conduct…Mr. Lesser informed me that I was not a good fit for the board [and] I learned a new trustee was being appointed… the new trustee is yet another longstanding personal connection of Mr. Lesser.”
Ms. Poskon continues to serve on the boards of Wheeler REIT (NASDAQ: WHLR) and Nam Tai Property (NYSE: NTP), and runs a consultancy focused on real estate capital markets expertise. Her replacement, Dionisio D’Aguilar, runs a laundromat chain in the Bahamas.
In the related party transaction section for its most recent 10-Q, Power REIT discloses, in part,
“Power REIT has entered into a synergistic relationship with Millennium Investment and Acquisition Company Inc... David H Lesser, Power REIT’s Chairman and CEO, is also Chairman and CEO of MILC. MILC established cannabis cultivation projects in Colorado, Oklahoma, and Michigan which are related to [our] acquisitions… Power REIT has entered into lease transactions with the related tenants in which MILC has controlling interests.”
In addition to serving as CEO and Chairman of Power REIT, David Lesser is also the company’s CFO and corporate secretary. Power REIT’s Chief Accounting Officer is Susan Hollander, who also serves as the controller for Millennium Investment and Acquisition Company Inc. Power REIT’s audit chairman is ninety years old.
Leah Gonzales is the MaloneBailey LLP engagement partner responsible for auditing Power REIT. According to PCAOB records, she has served as an engagement partner for multiple companies with volatile histories such as Utah-based CleanSpark (NASDAQ: CLSK), which has gone from $1/share to $39/share and now to $13/share in the last two years, Alpine 4 Holdings (NASDAQ: ALPP), which went from five cents to $7/share to $1/share today, and numerous other penny stocks.
Over the last three years, Power REIT stock has gone up nearly 1,000% from $5/share to ~$50/share.
Caveat emptor.
What to Read
“A Top Prosecutor, a Short Seller’s Confession, and a Columbia Professor Offer Clues to the DOJ Probe of Short Sellers” (Institutional Investor)
“Alex Wyman, who was an assistant U.S. attorney for the Central District of California — and whose name is on the subpoenas — left to join law firm Latham & Watkins that month. He will be in familiar company: According to emails II has seen, several partners at Latham have represented companies that pressed both the Securities and Exchange Commission and the DOJ to investigate the activist short sellers who targeted them.”
“An Alleged Fraud Uncovered by a Short Seller Ends in Gunfire” (WSJ)
“Investors, the majority of them Mormons living across the Western U.S., usually heard about J&J from family and friends. They were connected to marketers, who solicited investments in increments of $80,000 and $100,000 into the J&J entities. Investors signed nondisclosure agreements, J&J documents and correspondence with marketers show.”
“How Much Does Warren Buffett Dislike Investment Bankers? Enough to Shave $27 Million Off Alleghany Deal.” (Barron’s)
“It turns out that a deal price of $850 a share was reduced by the “financial advisory fee” paid to Alleghany’s financial advisor, according to the merger document filed late Monday. It states that Alleghany holders have ‘the right to receive $848.02 in cash, representing $850.00 per share less the financial advisory fee due to the financial advisor in connection with the merger.’”
Tweets of the Week
Until next week,
The Bear Cave