The Bear Cave #124

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

Jul 03, 2022

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New Activist Reports

Grizzly Research published on Nio Inc (NYSE: NIO — $35.7 billion), a Chinese electric car company. Grizzly Research alleged that Nio “juiced its numbers” through transactions with Wuhan Weineng, a related party formed by Nio and its major investors. Grizzly Research said Nio would transfer subscription revenue from battery sales to Wuhan Weineng so Nio could recognize the revenue immediately, instead of over a ~7-year life. Grizzly Research estimated this arrangement inflated revenue by about 10% and net income by about 95%. In addition, Grizzly Research highlighted the checkered public market history of Nio’s CEO and Chairman, Bin Li, who “worked closely with individuals involved in the Luckin Coffee fraud.”

Nio said the report “is without merit and contains numerous errors, unsupported speculations and misleading conclusions.” (The Bear Cave has no affiliation with Grizzly Research.)

Fuzzy Panda Research published on EVgo Inc (NASDAQ: EVGO — $1.49 billion), an electric vehicle charging network company. Fuzzy Panda highlighted that EVgo was purchased for only $134 million by investment firm LS Power in January 2020, but went public in a $2.6 billion SPAC merger just a year later. Notably, Fuzzy Panda found that the EVgo’s charger utilization has declined by 21% over the last two years, in part driven by the pandemic, and highlighted negative customer reviews:

"EVGO, you are such a terrible company…please file for bankruptcy and go away.”

“EVGO, every time I use your chargers, they don’t work.”

Fuzzy Panda also highlighted that a major EVgo shareholder, Jonathan Barrett and related entities, previously ran real estate and investing operations for Jeffrey Epstein. The company is down ~45% since its January 2021 SPAC deal and its lock-up expired yesterday.

Peabody Street Research published on Charge Enterprises (NASDAQ: CRGE — $925 million), a roll-up of electric vehicle charging and telecom infrastructure companies. Peabody Street alleged that the company’s executives “have a checkered history of alleged fraud, money laundering, and failed penny stock promotion.” For example, Peabody found the company’s promotional claim of becoming an “EV charging infrastructure provider” was actually just an attempt at building a parking lot for Amazon vans. Peabody also highlighted that the company entered into a financing agreement with entities connected to Andrew Farkas, “a NY real estate mogul who co-owned a marina with Jeffrey Epstein.”

Charge Enterprises stock is up nearly 10,000% over the last five years.

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of Skillz Inc (NYSE: SKLZ — $516 million) resigned after a little over one year “to pursue other opportunities.” The company is down ~90% since its December 2020 SPAC merger, was criticized by Wolfpack Research for spurious partnerships in March 2021, and was criticized by Eagle Eye Research for non-cash revenue recognition in April 2021.
CEO of Hyperfine Inc (NASDAQ: HYPR — $145 million) resigned after a little over one year “for personal reasons.” The company is down ~80% since its December 2021 SPAC merger.
CFO of Digital Media Solutions Inc (NYSE: DMS — $72 million) “will step down to pursue new career goals” after a little over one year. The company is down nearly 90% since its July 2020 SPAC merger.
CFO of Stride Inc (NYSE: LRN — $1.77 billion) “retired” after a little over two years. The company has had three CEOs and three CFOs in the last five years and is audited by BDO LLP.
CEO of Bed Bath & Beyond (NASDAQ: BBBY — $376 million) “left his role” as CEO after a little over two and a half years. In addition, the company’s Chief Merchandising Officer “ceased to serve” in his role after a little over two years. The company’s Chief Accounting Officer also left in early June after one year “to pursue another opportunity.”
Chairman and CEO of PureCycle Technologies (NASDAQ: PCT — $1.14 billion) resigned after nearly seven years. Two months ago, the company’s Chief Commercial Officer entered into a separation agreement. In November 2021, the company’s CFO also resigned after about thirteen months and in May 2021, Hindenburg Research highlighted that the company’s executive team “collectively took 6 companies public prior to PureCycle. All have failed, resulting in 2 bankruptcies, 3 delistings, and 1 acquisition after a ~95% decline.” PureCycle is now down ~75% since its March 2021 SPAC merger.
Chief Revenue Officer of Vroom Inc (NASDAQ: VRM — $174 million) resigned after six months. The company’s CEO resigned in May and the company is down ~97% since its July 2020 IPO.
Chief Accounting Officer of Sema4 Holdings (NASDAQ: SMFR — $483 million) resigned after one year. Two weeks ago, Sema4’s CFO also resigned and the company’s CEO changed his role in April. The company is down nearly 90% since its July 2021 SPAC merger.

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

What to Read

“Hedge fund manager Jim Chanos’s next ‘big short’ is data centres” (FT)

“Chanos, who remains best-known for predicting the collapse of energy group Enron two decades ago, is raising several hundred million dollars for a fund that will take short positions in US-listed real estate investment trusts.”

“Biotech Wizard Left a Trail of Fraud—Prosecutors Allege It Ended in Murder” (WSJ)

“Days before his arrest in May, Mr. Gumrukcu sold around 250,000 shares in Enochian for $2 million. They appear to have been purchased by Enochian’s chairman, Mr. Sindlev, for $8 a share on a day when the company’s stock price never exceeded $6.26. On Friday, it closed at $3.33.”

“CEO Stock Sales Raise Questions About Insider Trading” (WSJ)

“A CEO using a recently adopted plan to sell stock ahead of a spate of negative news ‘isn’t a smoking gun, it’s a smoking bazooka,’ because it raises a reasonable suspicion that the CEO could have been trading on inside information, said Nejat Seyhun, a University of Michigan finance professor who has studied trading by corporate insiders under preset plans.”