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The Bear Cave #126

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The Bear Cave #126

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

Edwin Dorsey
Jul 17, 2022
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The Bear Cave #126

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Welcome to The Bear Cave — your weekly source of short-seller news! If you are new, you can join here. Please hit the heart button if you like today’s newsletter and reply with any feedback.


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:

  1. 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.”

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.”


Tweets of the Week

Twitter avatar for @LuisVSanchez777
Luis V. Sanchez @LuisVSanchez777
If I was a short-seller (I'm long only). I'd be taking a close look at $U: - Execution issues with data platform - Aggressive & questionable M&A decisions - Demand destruction from weakness in customer base - Rapidly changing industry dynamics - Unprofitable - Nosebleed valuation
3:56 PM ∙ Jul 13, 2022
23Likes2Retweets
Twitter avatar for @buccocapital
Bucco Capital @buccocapital
No question about it This is one of the worst and most hilarious self-inflicted PR nightmares I've ever seen Legit could be an Onion article headline
Image
12:28 PM ∙ Jul 15, 2022
84Likes2Retweets
Twitter avatar for @BigRiverCapita1
Big River @BigRiverCapita1
$PLMR valuation still puzzling. Stock promotion sold to growth investors who don't understand insurance. Hard not to be cynical about sell-side analysts pumping who definitely know better. No peers use EPS ex Cats (!), SBC, and more. 14% ROE floor IF you ignore the bad stuff!
1:32 AM ∙ Jul 15, 2022
5Likes1Retweet
Twitter avatar for @InvestSpecial
Dalius - Special Situation Investments @InvestSpecial
New investment ideas from VIC 👇 Incl: $ODFL short, $PRGO, $GIII and $STKS $ODFL short pitch: – A high-fixed-cost business that benefited from massive tailwinds (Covid/delivery) and incompetent/hamstrung competition. – Margins are set to shrink going forward. ... 👇
8:55 AM ∙ Jul 16, 2022
17Likes2Retweets
Twitter avatar for @WallStCynic
Diogenes @WallStCynic
Hard to believe that the Nielsen data for $BYND is getting worse, but it is. Speculators still paying almost 6x revenues for this disaster.
7:21 PM ∙ Jul 12, 2022
203Likes12Retweets
Twitter avatar for @LongShortHC
Brett Caughran @LongShortHC
EXPANDING MY MONEY MAKING TOOLKIT: It's a bit of a rite of passage for Tiger-style investors moving to pod-style to have a difficult transition (mine definitely was!!). Why is that? Tiger-style investing is generally straight forward: long winners, short losers with 9-18m...
4:31 PM ∙ Jul 14, 2022
196Likes29Retweets
Twitter avatar for @auren
Auren 𝐇𝐨𝐟𝐟𝐦𝐚𝐧 @auren
when a tech company promotes its CFO to CEO, it usually is not a good sign
4:53 PM ∙ Jul 12, 2022
3,153Likes173Retweets
Twitter avatar for @DoombergT
Doomberg @DoombergT
1/ The US, Canada, and Mexico have enormous proven energy reserves and the technical know-how to become the dominant energy-producing region on the planet. It can be done cleanly, safely, and domestically – all while reducing the strength of our geopolitical enemies.
10:33 AM ∙ Jul 16, 2022
5,858Likes1,562Retweets
Twitter avatar for @daisy_haggard
Daisy Haggard @daisy_haggard
4 year old is livid because she thought we were travelling by FAIRY.. not FERRY 😬
10:30 AM ∙ Jul 11, 2022
156,516Likes7,617Retweets
Twitter avatar for @elonmusk
Elon Musk @elonmusk
Oh the irony lol
10:10 PM ∙ Jul 12, 2022
227,872Likes13,487Retweets

Until Thursday,

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