The Bear Cave #112

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

Apr 10, 2022

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New Activist Reports

Hindenburg Research published on Mullen Automotive (NASDAQ: MULN — $601 million), “an aspiring EV manufacturer that went public in late 2021 via reverse merger.” Hindenburg highlighted that the company’s stock has spiked roughly 300% on “retail investor euphoria over bold claims of ground-breaking technology” despite only spending $3 million on research and development in 2021. Hindenburg also noted that Mullen Automotive claimed to have a joint venture with NextMetals Ltd to manufacture batteries. However, an executive at NextMetals told Hindenburg the partnership “didn’t exist at all” and Mullen’s Founder/CEO, David Michery, was “a fast-talking hustler.” According to Hindenburg, Mr. Michery “led 5 failed penny stock companies prior to Mullen,” including two that had their registrations revoked by the SEC.

Spruce Point Capital published a 57,201-word presentation on Stryker Corporation (NYSE: SYK — $102 billion), a large medical technologies company. Spruce Point criticized the company’s “track record of paying rich premiums for acquisition targets” and highlighted that its total debt is currently ~5x EBITDA. In addition, Spruce Point conducted a “behavioral analysis of Stryker management” and believes the company “often delays bad news as long as possible.” As an example, Spruce Point cited a $500 million project to integrate various Enterprise Resource Planning software systems that was ultimately written off. Spruce Point concluded,

“In light of our concerns about the accuracy of Stryker’s financial reporting, and tactics it’s using to embellish results, we believe holding shares at this level represents a poor risk/reward.”

White Diamond Research published on Focus Universal Inc (NASDAQ: FCUV — $482 million). The company markets itself as “a provider of patented hardware and software design technologies for Internet of Things” but in reality “is a tiny, unprofitable, reseller of hydroponics equipment and pays for a variety of stock promotion articles.” White Diamond also pointed out that Focus Universal’s only supplier is owned by the company’s CEO and his wife. White Diamond called the company “an almost worthless pump and dump” with 98% downside.

The Bear Cave published on eXp World Holdings (NASDAQ: EXPI — $2.51 billion), a virtual real estate brokerage with a multi-level marketing model. The Bear Cave highlighted the company’s aggressive recruiting techniques including a seven-tier “cascading revenue share” for downline recruits and a partnership with Grant Cardone, a prominent real estate influencer and Scientologist. In addition, The Bear Cave noted past regulatory infractions by the company and published consumer complaints obtained through the Freedom of Information Act that showed less than stellar service by eXp agents.

Glenn Sanford, eXp’s CEO, tweeted that The Bear Cave was “sitting in pajamas writing stuff on stuff they’ll never understand.”

Glenn Sanford @ceoglenn

I believe most haters spend more time making stuff up about those they hate on then actually doing research to find out why someone is winning. If they did the research they could be a winner as well rather then sitting in pajamas writing stuff on stuff they’ll never understand.

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of FREYR Battery (NYSE: FREY — $1.33 billion) “mutually decided” to end his employment after one and a half years. The company is up about 15% since its July 2021 SPAC merger.
CFO of Core Scientific (NASDAQ: CORZ — $2.64 billion) made “a personal decision to pursue other business opportunities” after one and a half years. The company is down ~15% since its October 2021 SPAC merger and was criticized by Culper Research last month for “an uncanny ability to do business with fraudsters.”
CFO of Cepton Inc (NASDAQ: CPTN — $478 million) resigned after a little over one and a half years. The company is down nearly 70% since its January 2022 SPAC merger.
CFO of Cars Inc (NYSE: CARS — $881 million) resigned “to pursue a new opportunity with a pre-IPO, venture capital-backed company.” The company’s Chief Legal Officer is also leaving this month.
CFO of The Oncology Institute Inc (NASDAQ: TOI — $535 million) resigned “to pursue other opportunities” after a little over two years. The company is down about 25% since its November 2021 SPAC merger.
CEO of Paysafe ltd (NYSE: PSFE — $2.29 billion) “stepped down” after three years. It has fallen roughly 70% since merging with a Bill Foley-backed SPAC.
CFO of Doma Holdings (NYSE: DOMA — $605 million) resigned “solely for personal reasons” after three and a half years. The company is down over 80% since its July 2021 SPAC merger.
Kevin M. Stein “decided not to continue as a director” of Perimeter Solutions (NYSE: PRM — $1.81 billion) after five months. Perimeter went public through a “reverse takeover” of a London-based acquisition vehicle in November 2021. Mr. Stein is CEO of TransDigm.

Data for this section is provided by VerityData from VerityPlatform.com

What to Read

“Idea Brunch with Jon Cukierwar of Sohra Peak Capital Partners” (Sunday’s Idea Brunch)

“There are many companies that might meet the criteria above but, for unique reasons, are not screening well at the moment. While screening for strict criteria is quite efficient, an A-to-Z approach is best for finding the diamonds in the rough.”

“Chinese Executives Sell at the Right Time, Avoiding Billions in Losses” (WSJ)

“Chinese corporate insiders have avoided billions of dollars in losses by making well-timed share sales over the past several years, according to an academic analysis of securities filings. Insiders at companies based in China but listed on a U.S. exchange avoided at least $10 billion in losses on trades made between 2016 and mid-2021 by selling stock ahead of significant price declines, the researchers found.”

“SEC Says Employees Improperly Accessed Privileged Legal Records” (WSJ)

“The disclosure highlights concerns about the independence of the SEC’s in-house court system, which have persisted for years. The agency’s enforcement attorneys prosecute cases in the administrative courts before judges who are also SEC employees. The SEC’s commissioners, who run the agency and oversee the enforcement division’s work, can hear appeals of cases first resolved by the in-house judges.”