The Bear Cave #116
New Activist Reports, Recent Resignations, and Tweets of the Week
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New Activist Reports
Culper Research published on Veru Inc (NASDAQ: VERU — $677 million), a women’s health company that recently pivoted to making a drug to treat COVID-19 in hospitalized patients. Culper Research found “glaring anomalies in the Company's Phase III trial” and alleged the company artificially inflated the mortality rate of placebo patients by not requiring standard of care treatments in its placebo group and conducting 37 of its 57 test sites outside the U.S. in countries like Bulgaria and Mexico, which has a COVID mortality rate nearly 6x that of the United States. Culper Research also alleged the company was “run by a team of alleged frauds and failures” with “a history of alleged sham science.” For example, Veru’s Vice President of Clinical Affairs, Robert Getzenberg, was sued for claiming he developed cancer tests “with nearly 100% accuracy” that were later found to be “no more accurate than a coin flip.” Veru’s CEO, Mitchell Steiner, also previously ran GTx Inc, a pharmaceutical company that never commercialized a single drug and fell over 90% during his tenure.
Scorpion Capital published a 183-slide presentation on IONQ Inc (NYSE: IONQ — $1.17 billion), an upstart quantum computing company. Scorpion Capital called the company “a hoax with staged Nikola-style photos.” Scorpion wrote,
“We conducted 25 research interviews including 7 former employees and executives; 11 leading quantum computing experts including seminal names in the field, some who have published papers with IonQ’s founders and are intimately familiar with its technology; and 5 of its key ‘customers’ and partners. We believe our research represents the most in-depth due diligence to date on IonQ, leading us to conclude it is just another VC-backed SPAC scam.”
According to Scorpion Capital’s interviews and investigation, the company’s “claims of a 32-qubit machine are fraudulent” and its actual machine “is an old 11-qubit toy computer for demonstration purposes that ex-employees, leading quantum experts, and key partners all described as primitive [and] useless.” Scorpion highlighted that IonQ’s largest customers, the University of Maryland and Duke, “are so intertwined it is difficult to discern where they end and IonQ begins.” IonQ’s founders are professors at the universities, the company licenses technology from the universities in exchange for stock, and the company even leases office space from the University of Maryland. Shares were down ~25% this week and ~40% since the company’s September 2021 SPAC merger.
Hindenburg Research published on Singularity Future Technology (NASDAQ: SGLY — $93.2 million), a Chinese logistics company that pivoted to crypto mining. Hindenburg alleged that the company’s CEO is a financial criminal facing charges in China, and has been “hiding out in plain sight.” Hindenburg highlighted that in January 2022, just three months after pivoting to making crypto mining equipment, the company announced a $200 million order from a subsidiary of a China-based crypto company called SOS Ltd (NYSE: SOS). Hindenburg found that the Vice President of the SOS subsidiary that placed the order is the wife of the CEO of Singularity Future Technology and the transaction “appears to be a brazen undisclosed related party deal.” In addition, Singularity announced a “partnership with a 10 GW+ capacity U.S. power producer called Golden Mainland.” Hindenburg found that Golden Mainland created its website one day before the “partnership” press release and the CEO uses a Gmail address in SEC filings. Hindenburg concluded,
“We think SGLY is an obvious total scam, with little to no actual business operations. We have shared our findings with Nasdaq and authorities.”
Peabody Street Research also published on Singularity Future Technology and found “too many red flags to count.”
Notable executive departures disclosed in the past week include:
President of Pharma Services at NeoGenomics (NASDAQ: NEO — $1.18 billion) resigned after eleven months. Last month, the company’s CEO “stepped down” after eleven months as well. In March, the company’s Chief Operating Officer also resigned after only nine months. The Florida-based genetic testing company is down 75% over the last year.
CFO of Cerence Inc (NASDAQ: CRNC — $1.12 billion) resigned after just four weeks. The company said the resignation “did not involve any disagreement with the Company on any matter relating to its accounting policies or internal controls.” The company’s General Counsel also resigned in February of this year “to pursue another opportunity.” Cerence is audited by BDO LLP.
CFO of Calavo Growers (NASDAQ: CVGW — $539 million) resigned after seven months “for a CFO role at another company.” The company has had four different CEOs and five different CFOs in the last three years. In addition, the company “eliminated” its Chief Accounting Officer last month.
CFO of Sunrun Inc (NASDAQ: RUN — $4.91 billion) resigned after two years.
CEO of Shutterstock (NYSE: SSTK — $2.40 billion) resigned after a little over two years “to pursue other business opportunities.”
CEO of Fastly (NYSE: FSLY — $1.59 billion) will resign after a little over two years “once a successor is appointed.” The stock is down ~70% over the last twelve months. The company’s Chief Legal and Trust Officer is also resigning “to pursue another opportunity.”
CEO of Match Group (NASDAQ: MTCH — $21.2 billion) “announced her intention to step down” after a little over two years.
CFO of Velodyne Lidar (NASDAQ: VLDR — $368 million) resigned after three years “to spend time with his family in advance of pursuing career opportunities later this year.” The company is down over 80% since its September 2020 SPAC merger.
Founder and CEO of Definitive Healthcare (NASDAQ: DH — $3.04 billion) “will step down” after nearly twelve years. The company is down ~60% since its September 2021 IPO.
Chief Credit Officer and Chief Operating Officer of Broadmark Realty Capital Inc (NYSE: BRMK — $1.05 billion) were “eliminated” as part of a restructuring. The company is down ~20% since its November 2019 SPAC merger.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Facebook Deliberately Caused Havoc in Australia to Influence New Law, Whistleblowers Say” (WSJ)
“When Facebook blocked news pages last year to pre-empt Australian legislation that would force it to pay for content, it also took down hospitals, emergency services and charities. The company says that was inadvertent; whistleblowers allege it was a negotiating tactic.”
“Archegos considered becoming Deutsche Bank’s biggest shareholder via HNA stake” (FT)
“The family office, which imploded in 2021, received information about HNA’s stake that Archegos believed came from Deutsche chair Paul Achleitner, according to two people familiar with the matter.”
“Idea Brunch with Chris McIntyre of McIntyre Partnerships” (Sunday’s Idea Brunch)
“My basic strategy is to look for quality compounders, but I try to find those where the market is missing the business’s strength and shares are at a discount. There’s a variety of reasons why a high-quality business might be cheap, but in a well-trafficked name, there’s typically a compelling reason why it’s cheap. However, that’s not necessarily the case in special situations and lower liquidity investments. Often instead of a compelling reason why it’s cheap, there’s a compelling reason why it’s overlooked.”
Tweets of the Week
Until next week,
The Bear Cave