🐻The Bear Cave #15🐻
New Activist Reports, Interview with Sahm Adrangi, Red Flags at OneSmart (NYSE: ONE), And Much More
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Interview with Sahm Adrangi
This week I interviewed short activist Sahm Adrangi of Kerrisdale Capital. Listen to the interview on PodBean or watch it on YouTube below:
Interview Timeline: Introduction (0:00), Chinese Companies (0:41), Opinion on GSX Techedu (NYSE: GSX) (2:30), Ad Fraud and QuinStreet (NASDAQ: QNST) (3:50), Favorite Campaign: Globalstar (NYSE: GSAT) (6:25), Coming up with Ideas (9:45), What Sahm Looks For (12:55), Future of Research (18:25), Tech Companies & Match Group (19:30), Non-activist shorts (23:40), Transition from Credit to Equities (25:50), What Differentiates Kerrisdale (28:15), Coronavirus Themed Ideas (30:10), Favorite Activists (31:40), Twitter (NYSE: TWTR) (34:10), Favorite Journalists (35:55), Kerrisdale reports (37:35), Closing Remarks (42:10)
Follow Kerrisdale Capital on Twitter @KerrisdaleCap and join their email list at KerrisdaleCap.com
🚩🚩Red Flags at OneSmart International Group
OneSmart International Group (NYSE: ONE — $428 million) is a Chinese online education and daycare company that appears to have significant red flags unnoticed by the market.
In April, the company amended its 20-F annual filing in response to an SEC comment letter. The SEC letter read, in part,
“It appears your officer certifications filed under Exhibits 12.1 and 12.2 do not include the language referring to internal control over financial reporting that should appear … Please revise your filings to include the correct certifications.”
In addition to missing internal control certifications, OneSmart disclosed in June 2019 that its CFO had departed:
“Dong Li, OneSmart’s former Chief Financial Officer and director, will no longer serve as a member of the Board for personal reasons, effective immediately.”
Furthermore, the chairwoman of OneSmart’s 2019 audit committee was Min Zhang. According to a OneSmart filing:
“Ms. Min Zhang has resigned as an independent director on the Company's Board of Directors due to personal reasons, effective February 1, 2020.”
The SEC had also raised questions about the company before its NYSE listing. In a March 2018 letter the company responded to an SEC question trying to reconcile revenue and enrollment growth. OneSmart wrote,
“The Company respectfully advises the Staff that there was an error in the average monthly enrollment figures in fiscal years 2016 and 2017…”
On April 22, OneSmart received a letter from the SEC that stated,
“We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures.”
Caveat Emptor.
New Activist Reports
Muddy Waters said it was short Chinese online education company GSX Techedu (NYSE: GSX — $7.10 billion) “because it is a massive fraud.” Muddy Waters report concludes that “~70% of GSX’s users are fake.”
GSX was previously criticized by Citron Research, Grizzly Research, and The Bear Cave. GSX shares remain up about 25% YTD.
Hindenburg Research published on Sorrento Therapeutics (NASDAQ: SRNE — $1.02 billion). The stock is up about 100% this month on speculation that Sorrento discovered a coronavirus “cure.”
Viceroy Research published on Sorrento Therapeutics as well.
Land and Buildings, an RIA specializing in publicly traded real estate, issued an interesting negative report on Empire State Realty Trust (NYSE: ESRT — $1.21 billion).
Citron Research tweeted about Inovio Pharmaceuticals (NASDAQ: INO — $2.23 billion):
What to Read
“She Gets Calls And Texts Meant For Elon Musk. Some Are Pretty Weird” (NPR)
“There are a lot of people trying to reach celebrity entrepreneur Elon Musk. Sometimes, though, they get Lyndsay Tucker, a 25-year-old skin care consultant. Turns out, Tucker's cellphone number used to be registered to Musk...”
“SmileDirectClub Sues NBC Over News Report, Seeking $2.85 Billion” (WSJ)
“SmileDirectClub’s complaint claims that the reports from NBC News contained numerous errors involving the safety and effectiveness of its products, and that the network knew its stories about SmileDirectClub were untruthful.”
“Jesus Christ was also misunderstood, Masayoshi Son tells investors” (FT)
“Masayoshi Son compared himself to Jesus Christ while defending his investment strategy, after disclosing that SoftBank had run up a record $13bn annual loss on Monday.”
Tweets of the Week
Until next week,
The Bear Cave