The Bear Cave #146

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

Dec 04, 2022

Welcome to The Bear Cave! Our last premium articles were “The Great Crypto Collapse” published on November 17 and “Problems at Silvergate Capital (SI)” published on December 1. The next premium report comes out Thursday, December 15.

In addition, The Bear Cave’s author, Edwin Dorsey, is working on a personal Substack focused on exposing misconduct at the highest levels of Stanford University. You can sign up for updates here. The first major investigation is coming at 6pm ET on Tuesday and will be posted on TheyMustResign.Substack.com

New Activist Reports

Spruce Point Capital published on Saputo Inc (Toronto: SAP — CAD$14.0 billion), a Canadian dairy and cheese roll-up. Spruce Point highlighted the company’s weak international acquisitions, headwinds from lower dairy consumption, and dubious ESG claims. In addition, Spruce Point claimed private label brands were taking share from the company’s products and the company’s reduced investor disclosures could indicate “increasing financial stress” in its business. Spruce Point sees 40-60% downside risk.

Iceberg Research published on American Resources Corp (NASDAQ: AREC — $99 million), a coal and rare earth materials company. Iceberg alleged the company’s CEO and President have been “sued in the past for mismanaging investment funds, negligence, and failing to follow through on debt guarantees” — conduct that may be repeating today. For example, Iceberg highlighted that the company spent $2 million on “delinquent loans bought from related parties between 2017 and 2021.” In addition, Iceberg noted the company “is dangerously close to running out of money” and wrote,

“As of 30 September 2022, AREC had only $4.9m cash, and a burn rate of $23.5m over the last twelve months. Just last week, AREC filed an amended 10-K for the 2021 financial year, and in its liquidity disclosure, said that the company needs money to settle ‘payables and debt that are in default of their original agreements’”

Fuzzy Panda Research published on Fisker Inc (NYSE: FSR — $2.38 billion), an electric vehicle company. Fuzzy Panda wrote that the company “has large undisclosed bank guarantees” to its supplier and the company “will likely need to raise significantly more cash… in coming quarters to fund increasing losses.” In addition, Fuzzy Panda alleged the company’s CEO, Henrik Fisker, “is a pathological liar” based on Fuzzy Panda’s conversations with former employees and Mr. Fisker’s alleged pattern of misrepresenting the company’s technology. The company is down ~25% since its October 2020 SPAC merger.

Muddy Waters Research published a brief update on DLocal (NASDAQ: DLO — $3.70 billion), a fast-growing Uruguayan payments company. Muddy Waters wrote,

“We are more convinced than before that DLO used client funds to pay a special dividend to its pre-IPO shareholders. Rather than provide a detailed written explanation of the various issues we believe are byproducts of fraud and misusing client funds, DLO is holding a series of calls with brokers and their clients during which it provides non-specific, non-substantive denials… The failure to provide a written explanation that can be tested should be deemed an admission of guilt.”

Two weeks ago, Muddy Waters said DLocal “is likely a fraud” and highlighted other financial irregularities.

Viceroy Research published an update on Home REIT (London: HOME — GBP418 million), a property company that owns housing primarily for charities catering to homeless individuals. Viceroy said the company’s recent disclosures “all but confirms round-tripping of revenues to tenants via vendor agreements, low tenant quality and related party structures between major tenants.” Last week, Viceroy alleged that many of the company’s tenants were in severe financial distress.

Bleecker Street Research published on Energy Vault Holdings (NYSE: NRGV — $493 million), a sustainable energy storage solutions company. Bleecker Street called the company “a middle school science fair experiment” and highlighted the company’s spurious projections and dubious partnerships, often with entities in financial distress. Bleecker Street concluded that the company’s backlog of deals “is an illusion.”

Recent Resignations

Notable executive departures disclosed in the past week include:

CEO of AMC Networks (NASDAQ: AMCX — $827 million) “stepped down” after just 80 days on the job. The company has had three different CEOs and four different CFOs in the last three years and the board “is in the process of determining who it will name as the successor.”
CFO of H World Group Limited (NASDAQ: HTHT — $13.5 billion) stepped down “effective immediately” after one and a half years. The company is audited by Deloitte Touche Tohmatsu LLP. The specific audit engagement partner for the company, Mr. Suk Hung Jacky Wong, does not appear to have previously been an engagement partner for any other public company audits according to PCAOB records.
CFO of Insteel Industries (NYSE: IIIN — $580 million) resigned after a little over two and a half years “to pursue employment with another company.” The company’s prior CFO was CFO for 26 years and the company’s CEO and Chairman, H. O. Woltz III, has led the company for the last 32 years. The company is audited by Grant Thornton LLP.
CFO of Enfusion Inc (NYSE: ENFN — $1.10 billion) resigned after three and a half years “in order to pursue another career opportunity.” In August the company’s CEO resigned “so that he can spend more time with his family” and the company’s Executive Chairman “retired” in March. Enfusion Inc is down ~50% since its October 2021 IPO.
CEO of Solid Power Inc (NASDAQ: SLDP — $571 million) “retired” after eleven years and also departed the board. The company is down ~70% since its December 2021 SPAC merger.
Chief Compliance Officer of Barings BDC (NYSE: BBDC — $999 million) resigned after just three months.
Chief Accounting Officer of The Oncology Institute (NASDAQ: TOI — $106 million) resigned after a little over one year. The company is down ~85% since its November 2021 SPAC merger.

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

What to Read

“Disney Proposal to Restructure, on McKinsey’s Advice, Triggered Uproar From Creative Executives” (WSJ)

“Throughout his career, Mr. Chapek has used and praised a management framework that emphasizes accountability and a structure for corporate responsibility. The method, called ARCI, is often taught in business schools. Under the philosophy, there should be no ambiguity about who is responsible for the success or failure of an effort… ‘Who’s got the ‘A’ on this project?’ Mr. Chapek would often ask in meetings, according to people familiar with the matter—meaning, who is accountable for it?”

“A bombproof courtroom and a CEO in the dock: what to expect from the Wirecard trial” (FT)

“Three former senior managers of the disgraced German payments company, including chief executive Markus Braun, will be facing charges of fraud, embezzlement, and accounting and market manipulation in a trial that is expected to continue into at least 2024… The trial will take place within the precincts of one of Germany’s largest prisons, opened in 1894, in a high-security courtroom 5 meters underground and protected by a bombproof ceiling.”