The Bear Cave #141

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

Oct 30, 2022

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New Activist Reports

Night Market Research published on International Battery Metals Ltd (CNSX: IBAT — CAD$376 million), a Vancouver-based “extraction plant technology provider” for the lithium industry. Night Market cast doubt on the company’s claims of revolutionary lithium extraction technology and its leadership. For example, the company calls its CEO, John Burba, “the Godfather of Lithium” while his work experience includes being CTO at MolyCorp, a mining operation “that ended in an SEC investigation and bankruptcy five years after its IPO.” In addition, Mr. Burba was later CEO at Simbol, “a heavily promoted lithium extraction operation that ended in receivership, [with] its technology sold off for $1m.”

Night Market also noted that the company has less than two quarters of cash, “is attempting a highly dilutive equity for debt transaction,” and the company’s largest shareholders have sold nearly 30% of their shares this year. International Battery Metals Ltd stock is up ~250% in the last year.

Recent Resignations

Notable executive departures disclosed in the past week include:

CEO of Hello Group (NASDAQ: MOMO — $925 million) resigned “because of health reasons, effective immediately” after two years. In September a board member departed “due to personal reasons” and in June the company’s CFO retired.
CFO of China Life Insurance Co (OTC: LFCHY — $87.3 billion) resigned “due to the adjustment of work arrangements” after two and a half years. Six directors of the company have also resigned this year, with some citing “relevant regulations of the People’s Republic of China.” And in January the company’s Chairman departed because he was “currently under disciplinary review and investigation for suspected serious violations of discipline and law.”
CFO of Vista Outdoor (NYSE: VSTO — $1.68 billion) resigned after two and a half years “to pursue another opportunity.” The company’s prior CFO also departed after just two years.
Tal Payne, the CFO and COO of Check Point Software Technologies (NASDAQ: CHKP — $16.5 billion), “will take a six-months’ sabbatical leave for a cycling tour and for traveling around the world” after nearly 15 years.
Chief Accounting Officer of Professional Holding Corp (NASDAQ: PFHD — $376 million) resigned after just seven months. In February, the company’s Chairman/CEO was “terminated by mutual agreement” after eight years. The Coral Gables, Florida-based company is up ~100% since its March 2017 IPO.
General Counsel at Vivid Seats Inc (NASDAQ: SEAT — $1.72 billion) departed after one and a half years. The company is down ~15% since its October 2021 SPAC merger.
Chief Underwriting Officer of United Insurance Holdings Corp (NASDAQ: UIHC — $17.5 million) departed after about a year. In addition, the company’s Chief Talent Officer departed in August 2022, the company’s Chief Claims Officer departed in July 2022, the company’s prior Chief Underwriting and Risk Officer departed after just one year in July 2021, the company’s Chief Legal Officer departed in January 2021, the company’s Chief Revenue Officer departed in September 2020, and the company’s Chief Operating Officer was “terminated” in September 2020.
United Insurance Holdings Corp was previously subject to an activist short presentation by Anthony Bozza of Lakewood Capital in 2015 that noted the company’s CEO had been arrested five times. Following the presentation, the CEO of the Florida Association for Insurance Reform sent a letter to the SEC regarding Mr. Bozza’s “deliberate manipulation of Universal's stock price” and “attack on Florida's insurance market.” United Insurance stock has since fallen ~95%.

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

What to Read

“As Covid Hit, Washington Officials Traded Stocks With Exquisite Timing” (WSJ)

“In January 2020, the U.S. public was largely unaware of the threat posed by the virus spreading in China, but health officials were on high alert and girding for a crisis.
A deputy to top health official Anthony Fauci reported 10 sales of mutual funds and stocks totaling between $157,000 and $480,000 that month. Collectively, officials at another health agency, Health and Human Services, reported 60% more sales of stocks and funds in January than the average over the previous 12 months, driven by a handful of particularly active traders.”

“SEC Charges Canadian Cannabis Company and Former Senior Executive with Accounting Fraud” (SEC)

“According to the SEC’s order, in three separate quarters between 2019 and 2021, Cronos submitted financial statements with the SEC that contained material accounting errors related to, among other things, revenue recognition and goodwill impairment. The order also found that, in one of the quarters, [Chief Commercial Officer] Hilson entered into an undisclosed oral agreement to sell cannabis raw material and to repurchase cannabis product in the following quarter. This agreement was neither known nor accounted for by Cronos, which discovered the $2.3 million accounting error during an internal investigation… In agreeing to settle with Cronos, the Commission determined that the company should not incur a financial penalty, given its timely self-reporting, significant cooperation, and remediation.”

“Statement on Final Rules Regarding Clawbacks of Erroneously Awarded Compensation” (SEC)

“Corporate executives often are paid based on the performance of the companies they lead, with factors that may include revenue and business profits. If the company makes a material error in preparing the financial statements required under the securities laws, however, then an executive may receive compensation for reaching a milestone that in reality was never hit. Whether such inaccuracies are due to fraud, error, or any other factor, today’s rules would implement procedures that require issuers to recover erroneously-rewarded pay, a process known as a clawback.”