The Bear Cave #135

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

Sep 18, 2022

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New Activist Reports

Jehoshaphat Research published on Array Technologies (NASDAQ: ARRY — $2.68 billion), a solar energy company. Jehoshaphat highlighted the company’s controversial “bill-and-hold” revenue recognition policy “in which a company books revenue on product that is still sitting in the seller’s possession, or even in a third party supplier’s warehouse.” Jehoshaphat also published a partial call transcript with a former employee who claimed Array Technologies would sometimes recognize revenue before even manufacturing its product and played accounting games to avoid violating debt covenants. Jehoshaphat noted the company’s CEO, COO, Chief Commercial Officer, General Counsel, CTO, and Chief Procurement Officer have all departed in the last 18 months and Blackstone has reduced its stake in the company and has filed paper Form 144s with the SEC to register to sell more stock.

The company was down 15% this week and is down ~55% since its October 2020 IPO.

Kerrisdale Capital published on AST SpaceMobile (NASDAQ: ASTS — $1.56 billion), a satellite company “trying to sell the dream of connecting billions of people with mobile broadband directly to their phones from space.” Kerrisdale consulted experts who “yielded overwhelming skepticism” about the company’s satellite design, supply chain, and manufacturing prowess. Kerrisdale concluded,

“AST is an ambitious, wildly risky science project that has no business (literally) being public – only the SPAC bubble of 2021 could have managed to change its destiny from being a forgotten zero tucked away in a few venture capital funds into what is rapidly becoming a classic stock promote.”

The company was down 26% this week and is down ~15% since its April 2021 SPAC merger.

NINGI Research published on BRP Group (NASDAQ: BRP — $3.43 billion), a Tampa-based insurance brokerage. NINGI Research said the company “doctored its organic growth rate to beat analysts’ estimates” and highlighted declining margins and increasing interest expenses as headwinds. Specifically, NINGI Research alleged the company inflated organic revenue through spurious intercompany transactions and concluded that its failed M&A strategy may lead to a share offering in the near future.

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of bluebird bio Inc (NASDAQ: BLUE — $489 million) resigned after just seven months. The company’s prior CFO left “to pursue a new opportunity” in March after just five months and the company’s Chief Accounting Officer resigned in February after just four months.
CFO of Hyliion Holdings (NYSE: HYLN — $534 million) departed after a little over one and a half years. Bonitas Research previously criticized the company’s hybrid truck claims and the stock is down ~70% since its June 2020 SPAC merger.
CFO of Goosehead Insurance (NASDAQ: GSHD — $1.51 billion) “will be transitioning out of Goosehead and pursuing other opportunities” after six and a half years. The incoming CFO, Mark Jones Jr., is the son of the company’s CEO, Mark Jones. Mr. Jones Jr is also the brother-in-law of Ryan Langston, the company’s Chief Legal Officer. Goosehead Insurance is down ~70% over the last twelve months and up roughly 150% since its April 2018 IPO.
CEO of Gorilla Technology Group (NASDAQ: GRRR — $867 million) retired after 22 years. The company is up about 20% since its July 2022 SPAC merger.
Chief Accounting Officer of Skillsoft Corp (NYSE: SKIL — $350 million) resigned “to pursue other career opportunities” after a little over a year. The company is down ~80% since its June 2021 SPAC merger.
Chief Accounting Officer of Dream Finders Homes (NASDAQ: DFH — $1.04 billion) resigned after five years “in order to pursue a new opportunity.” The company’s CFO also resigned in September 2021 after just one year and the company is down ~50% since its January 2021 IPO.
Chief Accounting Officer of Ziff Davis Inc (NASDAQ: ZD — $3.56 billion) “entered into a separation and release of claims agreement” after a little over ten years. The company is audited by BDO LLP and has previously faced criticism from GlassHouse Research, Citron Research, and Hindenburg Research for “egregious insider self-enrichment and a lack of truly independent board oversight.”

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

What to Read

“The Search for Dirt on the Twitter Whistle-Blower” (New Yorker)

“At least six research outfits—Gerson Lehrman Group, AlphaSights, Mosaic Research Management, Ridgetop Research, Coleman Research Group, and Guidepoint—approached former colleagues of Zatko’s at Stripe, Google, and the Pentagon research agency darpa. All offered to pay for information, sometimes noting that the compensation would be high or apparently unrestricted. At least two investment firms, Farallon Capital Management L.L.C. and Pentwater Capital Management L.P., also sought information from individuals close to Zatko… None of the members of the Stripe chat who spoke with me said that they accepted payment or agreed to speak to the firms about Zatko, and all said they wished to defend his credibility.”

“U.S. DOJ short-selling probe looks at trading in Amazon, Microsoft, JPM” (Bloomberg)

“The U.S Department of Justice has subpoenaed some short sellers for trading information on firms including Amazon.com Inc, Microsoft Corp and JPMorgan Chase & Co, as part of a short-selling probe, Bloomberg News reported on Monday. The DOJ sent subpoenas over the past few months seeking details on transactions in several blue-chip stocks, according to the report that cited people familiar with the matter.”

“SEC Obtains Partial Summary Judgment Against Microcap Issuer and Its CEO” (SEC)

“According to the SEC's complaint, Nutra Pharma Corporation, a microcap issuer that purports to make pain relief drugs with cobra venom, and its CEO, Rik Deitsch, issued or posted a series of press releases that materially misled investors. The releases allegedly implied, among other things, that Nutra Pharma had taken purported steps to distribute Nyloxin internationally, when it had not, and that Nutra Pharma had expanded and upgraded its cobra farm facilities, when it did not own those facilities or its cobras.”