The Bear Cave #139

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

Oct 16, 2022

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

Blue Orca Capital published on Enviva Inc (NYSE: EVA — $3.20 billion), the world’s largest maker of wood pellets. Blue Orca called the company “a dangerously levered serial capital raiser which generates nowhere near the cash from operations to support its dividends, which are increasingly funded through capital raising.” Blue Orca claimed the company’s business of grinding wood from U.S. forests into pellets and shipping them to Europe for power plants to burn for “renewable energy” is an ESG farce that drives “an orgy of deforestation.” Blue Orca concluded,

“EVA’s business model and valuation are predicated on its claims that it is not procuring from clear-cutting forests or driving demand for deforestation. We think the evidence indicates that this is false, and do not believe EVA is suitable for ESG investment.”

Enviva stock closed down 22% this week.

Spruce Point Capital published on MGP Ingredients (NASDAQ: MGPI — $2.17 billion), a distilled spirits and food products company. Spruce Point alleged that the company’s transition into the branded liquor market through a major acquisition “is failing to meet its promoted benefits” and the company is “making unusual cash flow and reporting revisions that point to historical financial misstatement.” Spruce Point also highlighted that the company’s controlling family continues reducing their exposure and predicted 35%-55% downside potential.

The Foundation for Financial Journalism (FFJ) published on PennyMac Financial Services (NYSE: PFSI — $2.32 billion), a residential mortgage company. FFJ said PennyMac “is in a world of trouble” because recent interest rate hikes will damage the company’s record profits under the low interest rates during 2020 and 2021. FFJ noted that “PennyMac’s operational and risk disclosures are staggeringly inadequate” and predicted that “a recession would be a disaster for PennyMac’s highly leveraged borrower base, leading to big spikes in both delinquencies and defaults.”

The Foundation for Financial Journalism is led by Roddy Boyd, a prolific journalist who was early in highlighting problems with Valeant. The article also discloses: “In conjunction with this article’s release, FFJ is using a so-called balance sheet partner. FFJ will receive a percentage of any profits realized from the balance sheet partner’s use of securities to profit from a decline in PennyMac’s share price...”

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of Skillsoft Corp (NYSE: SKIL — $242 million) resigned after a little over a year “to pursue personal interests.” Earlier this month the company’s Chief Accounting Officer resigned after one year “to pursue other career opportunities” and the company is down ~85% since its June 2021 SPAC merger.
CEO and CFO of Polished Inc (NYSE: POL — $52 million) both resigned after about one year. In addition, the company’s Chief Accounting Officer departed in April after just nine months and the company has fallen ~95% since its July 2020 SPAC merger.
CFO of Beyond Meat (NASDAQ: BYND — $849 million) is stepping down “to pursue another opportunity” after a little over one year. Three weeks ago, the company’s Chief Operating Officer was “suspended effective immediately” after allegedly biting part of another man’s nose off in a road rage incident and the company’s Chief Supply Chain Officer also resigned after ten months “to pursue another opportunity.” The company is down ~80% since its May 2019 IPO.
CFO of Sealed Air Corp (NYSE: SEE — $6.66 billion) retired after one and a half years. The company has had four different CFOs in the last five years.
CEO of Angi Inc (NASDAQ: ANGI — $1.08 billion) “stepped down effective immediately” after one and a half years. The company has had four different CEOs and five different CFOs in the last five years.
CFO of Siriuspoint (NYSE: SPNT — $812 million) resigned after one and a half years “to pursue other opportunities.” The company’s Chief Operating Officer also resigned after a little over one year in June.
CEO of Five9 Inc (NASDAQ: FIVN — $3.85 billion) resigned after four and a half years “and accepted another role as CEO of a privately held pre-IPO company outside of the CCaaS space.” The company is down ~65% over the last twelve months.
Chief Accounting Officer of Hain Celestial Group (NASDAQ: HAIN — $1.45 billion) resigned after just four months “in order to pursue another opportunity.” The company is down ~60% this year.

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

What to Read

“The Regulators of Facebook, Google and Amazon Also Invest in the Companies’ Stocks” (WSJ)

“Joseph Simons, the FTC chairman from 2018 until January 2021, disclosed more than 1,300 trades during his tenure. Fewer than a dozen were trades in individual stocks; the rest were in mutual funds and exchange-traded funds. Half of the individual stocks he reported owning were technology and telecommunications companies involved in FTC reviews.”

“Elon Musk Has the World’s Strangest Social Calendar” (NYT)

“Mr. Musk has, in particular, pursued a friendship with one comedian whose public image revolves around the outrageous steps he takes to relate to other people: Nathan Fielder, who first became famous for his Comedy Central show ‘Nathan For You,’ which turned a series of preposterous business ideas, including excrement-flavored frozen yogurt and athletic apparel dedicated to raising Holocaust awareness, into the definitive parody of modern American entrepreneurship.”

“Nikola Founder Trevor Milton Convicted of Securities Fraud” (WSJ)

“Prosecution witnesses included ordinary investors and current and former Nikola employees. Company executives testified that they had concerns about Mr. Milton’s public statements and interviews. Nikola Chief Executive Mark Russell testified that at one point executives staged an intervention and changed corporate social-media account passwords in an attempt to deny Mr. Milton use of them.”

“How a New Anti-Woke Bank Stumbled” (WSJ)

“The startup, called GloriFi, initially aimed to launch with bank accounts, credit cards, mortgages and insurance, while touting what it called pro-America values such as capitalism, family, law enforcement and the freedom to ‘celebrate your love of God and country.’ Within months, the investors’ money was nearly gone, and GloriFi was on the verge of bankruptcy. It missed launch dates, blaming faulty technology and failures by vendors, and laid off dozens of employees. It stumbled with products; for instance, a plan to make a credit card out of the same material used for shell casings failed when the company realized the material could interfere with security chips and potentially be too thick for payment terminals, according to people familiar with the matter.”