The Bear Cave #126

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

Jul 17, 2022

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New Activist Reports

Muddy Waters Research published on Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI — $2.73 billion), a renewable energy investment company. Muddy Waters said the company’s “accounting is so complex and misleading that its financial statements are effectively meaningless.” For example, Muddy Waters alleged the company inflates GAAP income by including non-cash tax credits given to third parties, using “implausibly low” discount rates on residual assets used in securitizations, and booking non-cash “payment-in-kind” interest payments from stressed borrowers.

Overall, Muddy Waters adjusts the company’s operating cash flow down nearly 40% and says its “ESG” mission stands for “exaggerating, scamming, and grifting.” Carson Block, the founder of Muddy Waters, also did a Zer0esTv interview on the company and published an open letter.

NINGI Research published on Sinch AB (Stockholm: SINCH — SEK16.9 billion), a Swedish communications and software company. NINGI Research alleged that Sinch AB acquired toxic assets and used spurious accounting “to beat analysts’ estimates and pump its share price.” For example, the company expensed zero R&D costs in 2021, while peer Twilio expensed 28% of its revenue. In addition, NINGI Research found that the company reported different numbers for synonymous terms like “unbilled accounts receivable,” “accrued income,” and “accrued revenue” and NINGI highlighted that Deloitte had found material weaknesses in the company’s Indian subsidiary.

NINGI Research said, in their opinion,

“The financial position of the company is misstated and to no extent presents an accurate picture of the business.”

Shares fell over 40% this week following the report.

On Tuesday, Bonitas Research published on Gogoro (NASDAQ: GGR — $1.44 billion), a Taiwanese electric scooter company with interchangeable electric batteries. Bonitas claimed that, according to vehicle registration data from the Taiwan Ministry of Transportation and Communications, Gogoro’s Q2 vehicle registration declined ~20% compared to last year. Bonitas also noted increasing competition and wrote, “we think Gogoro is a de-SPACed cash-burning over-valued stock promotion with declining user growth.”

The company has fallen slightly over 40% since its April 2022 SPAC merger.

On Thursday, Bonitas Research published on Alphatec Holdings (NASDAQ: ATEC — $679 million), a medical technology company focused on spinal disorders. Bonitas said the company has “at least four undisclosed related party distributors” established by former employees and company shareholders. Bonitas alleged that the company’s “fake sales resulted in fake costs of goods sold, which are reflected as fake inventories on ATEC’s balance sheet.”

J Cap Research published on Lake Resources (ASX: LKE — AUD$841 million), a large lithium explorer working to produce “cleaner lithium.” J Cap alleged the company’s unproven lithium extraction approach would “use large amounts of water and produce toxic waste” and highlighted that the company has failed to “get an operational pilot plant on site three years after promising it would.” Moreover, company insiders have sold around $8 million in stock over the last year and the company has granted ~40 million stock options to firms publishing favorable research. J Cap also noted the company’s CEO resigned in June without a permanent replacement.

Recent Resignations

Notable executive departures disclosed in the past week include:

CEO of Lordstown Motors (NASDAQ: RIDE — $410 million) resigned after eleven months and the company’s chief commercial officer also departed after eight months. The company has had four different CEOs and three different CFOs in the last three years and has fallen ~80% since its October 2020 SPAC merger. Hindenburg Research previously called the company a “mirage” with “fake orders and production hurdles.”
CFO of Desktop Metal (NYSE: DM — $771 million) resigned after two years. Last month, the CEO of the company’s Desktop Health subsidiary departed after less than one and half years. The company is down ~75% since its December 2020 SPAC merger.
CEO of The Gap (NYSE: GPS — $3.07 billion) “is stepping down” after less than two and a half years on the job. The company’s Old Navy subsidiary CEO also departed in April after one and a half years.
CEO of Clarivate (NYSE: CLVT — $9.03 billion) is retiring at the age of 79 after about three years. The company’s Chief Accounting Officer “stepped down” after five years in March, and the President of the company’s Science Group entered into a separation agreement after three years in April.
CEO of Agios Pharmaceuticals (NASDAQ: AGIO — $1.22 billion) resigned after about three and a half years. The company’s Chief Medical Officer, Chief Commercial Officer, and Chief Scientific Officer have also all resigned, “stepped down,” or “transitioned from a full-time employee to a part-time employee” in the last year.
Julie Iskow, an independent director and audit committee member for Cvent Holding Corp (NASDAQ: CVT — $2.62 billion) resigned after just two months. Her predecessor on the audit committee, Sanju Bansal, also resigned after under one year. In addition, Cvent’s General Counsel resigned in April and the company is down ~45% since its December 2021 SPAC merger.
General Counsel of Organon & Co (NYSE: OGN — $8.11 billion) resigned “to pursue another opportunity” after a little over one year. The company is roughly flat since its May 2021 IPO.

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

What to Read

“A Short Seller's Life Upended: Carson Block Questions Future” (Bloomberg)

“In October, federal agents wearing blue windbreakers approached Block as he was putting one of his kids into his car. They showed him a nine-page subpoena and seized his phones. Block’s view is that the universe has flipped upside down. In the past, the authorities used his research as a starting point for their own inquiries, delisting companies or leveling regulatory or criminal charges. Now, they’re examining him.”

“The DOJ’s Short-Seller Probe Was the Star of a Debate Between Carson Block and a Former SEC Commissioner” (Institutional Investor)

“Shortly after his research on short sellers was published in 2018, Mitts became a consultant to companies targeted by short sellers, and after that, a paid consultant to the DOJ. Block said Mitts also submitted an SEC rulemaking petition in 2020 based on the research ‘which claimed that manipulation was widespread.’”

“Idea Brunch #2 with Josh Young of Bison Interests” (Sunday’s Idea Brunch)

“I particularly admire Alex Verge, CEO of Journey Energy. He had success at multiple prior companies to the point where he was financially independent. And then, when a pension fund asked him to help them with a challenging portfolio of oil and gas assets, he took the reins, rolled a large portion of his net worth into the company, and aggressively repositioned it through one of the most severe industry downturns in history. Alex preserved equity value with herculean efforts: executing on dozens of small acquisitions and divestitures, financing and re-financing debt, and at one point re-purchasing 25% of the company from a foreign owner.”