The Bear Cave #147
New Activist Reports, Recent Resignations, and Tweets of the Week
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 investigation comes out this Thursday, December 15.
New Activist Reports
Hindenburg Research published on Welltower Inc (NYSE: WELL — $31.5 billion), a healthcare REIT that owns ~1,500 senior housing facilities in the United States. Hindenburg alleged the company concealed problems with its largest tenant, a non-profit health system called ProMedica that accounted for 12% operating income, by moving it into a spurious joint venture partnership. Hindenburg found Welltower’s joint venture partner, Integra Health, is led by a dubious 29-year-old CEO, appears to have no other employees, and “seems to barely exist.” Hindenburg also highlighted that the company faces headwinds from a downturn in the health facilities market and large near-term maturities in a rising rate environment. Hindenburg concluded,
“Overall, we think Welltower is an overpriced-to-perfection REIT obfuscating its distressed assets, raising questions about both its portfolio and the credibility of management as it attempts to raise capital from investors.”
Jehoshaphat Research published on Progyny Inc (NASDAQ: PGNY — $2.92 billion), a fertility benefits management company. Jehoshaphat alleged the company “is deceiving the investor community via its financial reporting practices.” Specifically, Jehoshaphat alleged the company 1) started booking profits on “expected” results rather than historical results, 2) stopped accruing allowances for customer cancellations, and 3) may be concealing bad debt expenses through “reversals of inflated revenues” and other questionable accounting practices. Jehoshaphat also conducted expert calls that cast doubt on the company’s reported numbers and suggested the company is actually unprofitable.
Progeny fell ~9% this week and is up ~100% since its October 2019 IPO.
Bonitas Research published on FREYR Battery (NYSE: FREY — $1.53 billion), a clean battery solutions company. Bonitas found that the land for the company’s new “ESG friendly” battery site in Norway is owned by company insiders and related parties, drawing into question the company’s governance. Bonitas concluded,
“FREYR is a pre-revenue company that continues to invest heavily in land secretly owned by FREYR insiders with no discernable proprietary technology that (somehow) obtained a US$2 billion valuation using a SPAC merger in 2021.”
The Boatman Capital Research published an open letter on Home REIT (London: HOME — GBP367 million), a property company that owns housing primarily for charities catering to homeless individuals. The Boatman Capital owns stock in Home REIT and wants the chairwomen to resign over “significant accounting issues,” the company’s failure to disclose payments to its tenants, and poor acquisition due diligence, among other factors. Two weeks ago, Viceroy Research published on the company and alleged many of its customers were in financial distress.
Viceroy Research published an update on Samhallsbyggnadsbolaget (Stockholm: SBB — SEK28.8 billion), a Swedish rollup of rent-controlled properties. Viceroy said the company misrepresented its recent asset sale to Brookfield and noted the transaction occurred at an 11% discount to book value and “will significantly impact SBB’s yield and its ability to continue paying dividends.” In February, Viceroy alleged the company had “rampant insider dealing, textbook governance problems, and a multitude of financial shenanigans.”
GlassHouse Research published on Catalent Inc (NYSE: CTLT — $8.04 billion), a developer and distributor of biologics and consumer health products. GlassHouse called Catalent “a deteriorating company propped up with accounting gimmicks.” For example, GlassHouse highlighted that the company changed its revenue recognition policy and then began realizing high amounts of premature revenue. In addition, GlassHouse highlighted high executive turnover, Catalent’s one-time pandemic benefit, and “one of the lowest balances of insider ownership ever reported.”
Citron Research published on agilon health (NYSE: AGL — $7.13 billion), a Medicare billing and physician management services company. Citron highlighted that the company “is on track to lose $70 million in 2022” and said its best days are behind it “as their business model unknowingly got torpedoed by the Supreme Court of the United States without Wall Street noticing.” Specifically, Citron believes the Supreme Court’s decision to not hear UnitedHealthcare v. Secretary of Health and Human Services will harm agilon health because the market for Medicare overpayments will be diminished.
Independent short-seller Keith Dalrymple published a second article on Vertiv Holdings (NYSE: VRT — $5.15 billion), a data center equipment and services company. The article claims Vertiv dramatically overpaid for its acquisition of E&I Engineering last year, fitting a pattern of enthusiastic forecasts that “end in disappointment.” Last month, Dalrymple also alleged the company was booking billions in unprofitable business “to project the optics of growth.”
Grizzly Research published on ESS Tech (NYSE: GWH — $391 million), an “environmentally sustainable” iron flow battery company. Grizzly Research alleged that the company’s breakthrough partnership with “Energy Storage Industries Asia Pacific” lacks economic substance because the partner is “a de-facto subsidiary of ESS masquerading as a third-party client.” The partnership is ESS Tech’s “only relevant revenue generating agreement,” and the company is down ~75% since its October 2021 SPAC merger.
The Bear Cave has no affiliation with Grizzly Research.
Notable executive departures disclosed in the past week include:
CEO of Fresenius Medical Care (NYSE: FMS — $9.36 billion) “will leave the company at her own request, with immediate effect” after just two months.
CFO of NeoGenomics (NASDAQ: NEO — $1.48 billion) is stepping down after eleven months. In November, the company’s President of Clinical service resigned after eight months. In May, the company’s Chief Strategy Officer resigned after a little over two years “to pursue other interests” and the President of Pharma Services resigned after eleven months. In April, the company’s CEO “stepped down” after eleven months as well. In March, the company’s Chief Operating Officer also resigned after only nine months. The Florida-based genetic testing company is down ~65% over the last year.
CEO of Butterfly Network Inc (NYSE: BFLY — $544 million) “mutually agreed” to leave after a little under two years. Last month the company’s Chief Commercial Officer also left after under two years “to pursue another opportunity” and in April the company’s CFO resigned after one and a half years “to pursue opportunities outside of the company.” Butterfly Network Inc is down ~75% since its February 2021 SPAC merger.
CEO of Custom Truck One Source (NYSE: CTOS — $1.65 billion) is retiring after about eight years. In May, the company’s CFO resigned after four years “for another opportunity at a private company” and in December 2021 a board member departed after eight months due to “the recent reduction in ownership of the company's common stock by investment funds affiliated with Blackstone.” The company is down ~35% since its July 2019 SPAC merger.
James Fu Bin Lu resigned from the board of Playtika Holding Corp (NASDAQ: PLTK — $3.11 billion) after five months. In his resignation letter, Mr. Lu said he “observed significant deficiencies in the company’s current governance practices.” Mr. Lu wrote, in part,
“In particular, I raised my discomfort around the fact that the Board is largely controlled by management, leading to several instances of conflicts of interest and the possible enrichment of management at the expense of stockholders. For example, among many other instances set forth in my letter, the Company’s retention plan is administered by and subject to the sole interpretation of the CEO who also serves as the Chair of the Board and who also stands to gain the most from the plan. Beyond the retention plan, this lack of independent board oversight of management has also led to significant costs and write-offs in at least one related party transaction which I personally believe to have been avoidable.”
In November 2021, The Bear Cave published on Playtika and wrote,
“Playtika is reliant on large tech platforms, is positioned against social winds, is encumbered by $2.5 billion in debt, plays in a highly competitive industry with low barriers to entry, profits off of gambling addicts, and faces major and immediate headwinds in its most profitable games. Don’t play with Playtika.”
Data for this section is provided by VerityData from VerityPlatform.com
Hedge Fund Analyst Christmas List
The Bear Cave is preparing our annual “Hedge Fund Analyst Christmas List” highlighting the best resources for professional investors. If you know of an outstanding resource, website, podcast, blog, newsletter, paid service, database, or project please hit reply or email firstname.lastname@example.org. You can read last year’s list here.
What to Read
“How the gates closed on Blackstone’s runaway real estate vehicle” (FT)
“Blackstone hired hundreds of sales and marketing staff to sell Breit and made the fund broadly available to wealth advisers. It even created ‘Blackstone University,’ an online portal where the advisers could be indoctrinated on the fund’s merits…”
“Sen. Warren demands answers from Silvergate Bank about its business dealings with FTX” (NBC)
“A former top FTX employee said Silvergate was FTX’s primary banking partner. In the conversation, a recording of which was shared with NBC News, the former employee described transfers of funds between FTX’s Silvergate account, which included FTX customers’ money, and accounts belonging to other entities believed to be controlled by Bankman-Fried, including Alameda Research, the supposedly separate crypto trading operation. The investment manager told NBC News he shared some of the former employee’s statements with members of the Senate banking committee.”
“California Executive Compensation Consultant Sentenced To Prison For Committing Insider Trading” (DoJ)
“Between July 2021 and September 2021, Kadmon, which, prior to its acquisition by Sanofi, was a publicly-traded biopharmaceutical company traded under the ticker symbol “KDMN” on the NASDAQ, engaged GLASSNER and the Consulting Firm to provide executive compensation consulting services related to a potential acquisition. In connection with this engagement, GLASSNER had access to material, non-public information, which he misappropriated and, in violation of the duties that he owed to Kadmon, used to trade Kadmon stock and call options…”
“Stanford’s Disappearing Dean Lisa Caldera” (Edwin Dorsey)
“Nowhere is the dysfunction of President Tessier-Lavigne’s administration more evident than Dean Lisa Caldera, who is the lead Dean responsible for preventing student suicides, a named defendant in the Katie Meyer wrongful death lawsuit, and the owner of a booming college admissions consulting business.”
Tweets of the Week
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