The Bear Cave #155
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Planet Fitness (PLNT)” published on January 19 and “More Problems at Planet Fitness (PLNT)” published on February 2. The next premium investigation comes out Thursday, February 16.
New Activist Reports
Quintessential Capital Management published on Darktrace plc (London: DARK — GBP1.75 billion), a British cybersecurity company. Quintessential Capital said it was “deeply skeptical about the validity of Darktrace’s financial statements and fear that sales, margins, and growth rates may be overstated.” Specifically, Quintessential Capital alleged that Darktrace used marketing expenditures to channel funds to partners for phantom purchases in round-tripped transactions, some of which “involved shell companies in offshore jurisdictions manned by individuals with ties to organized crime.”
Following the report, the Financial Times reported that the head of European equity research for a firm covering Darktrace is married to the company’s head of investor relations.
Fuzzy Panda Research published on Lucid Group (NASDAQ: LCID — $19.5 billion), an electric car company. Fuzzy Panda alleged that recent buyout rumors for Lucid were fake and “suspiciously timed one week after a major lock-up expiration.” Fuzzy Panda noted that the source of speculation of a Saudi buyout of Lucid appears to be “Betaville,” an outlet with a poor track record operated by a freelance journalist.
Viceroy Research published a case study concerning Medical Properties Trust (NYSE: MPW — $7.66 billion), a Birmingham-based REIT that owns hospitals typically in long-term sale-leaseback transactions. Specifically, Viceroy alleged Medical Properties Trust paid 3x market value for a neuropsychiatric hospital in Houston. Viceroy also alleged that Medical Properties Trust “capitalizes these absurd overpayments, and proceeds to borrow more money to make more uncommercial investments.”
Separately, Viceroy Research published an open letter to Mr. Terry Sparks, the PricewaterhouseCoopers LLP engagement partner responsible for auditing Medical Properties Trust. Viceroy “highlighted numerous uncommercial transactions which substantiate our belief that MPW round-trips revenues” and said it has “spoken with various whistleblowers… since the publication of our report.”
In October 2022, The Bear Cave published on Medical Properties Trust and highlighted that the company appeared to donate money to a church group attended by auditor Terry Sparks.
In response to a massive investigation by Hindenburg Research, the Adani Group published a 413-page response and called Hindenburg Research the “Madoffs of Manhattan” and said the Hindenburg investigation was “a calculated attack on India, the independence, integrity, and quality of Indian institutions, and the growth story and ambition of India.”
Hindenburg Research countered that the Adani Group’s response was non-substantive and “ignores every key allegation we raised.” Hindenburg also wrote,
“India is a vibrant democracy and an emerging superpower with an exciting future. We also believe India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation.”
Following steep stock declines in the seven Adani Group companies, the Adani Group canceled a ~USD$2.5 billion equity offering. Gautam Adani, the group’s founder and chairperson, published a 4-minute statement and told investors their “balance sheet is healthy and assets are robust.”
Recent Resignations
Notable executive departures disclosed in the past week include:
Interim CFO of American International Group (NYSE: AIG — $43.7 billion) was “terminated” after just fourteen days “after the company became aware that he violated his confidentiality/non-disclosure obligations to the company.”
Chief Investment Officer of Corebridge Financial (NYSE: CRBG — $13.8 billion) resigned after ten months “in connection with her appointment as AIG Interim Chief Financial Officer.” AIG spun off Corebridge Financial in September 2022.
CFO of Lanvin Group Holdings (NYSE: LANV — $802 million) resigned after a little over one year. The Chinese luxury fashion company is down ~40% since its December 2022 SPAC merger.
CEO of REV Group (NYSE: REVG — $780 million) “mutually agreed” to terminate employment after nearly three years. The company’s Chief Operating Officer departed in August 2020 and the company’s CFO departed in June 2020.
CFO of Mercury Systems (NASDAQ: MRCY — $3.20 billion) departed “to accept an opportunity at a private company” after five years. In July 2022, GlassHouse Research called Mercury Systems “a deteriorating roll-up that is set to implode” and alleged the company prematurely recognized revenue among other alleged accounting issues.
SVP of Merchandising at Ethan Allen Interiors Inc (NYSE: ETD — $773 million) departed after eleven months. In February 2022, the company dismissed KPMG as its auditor and engaged CohnReznick LLP. In December 2021, the company’s Chief Marketing Officer also departed after two years.
Three board members of Domo Inc (NASDAQ: DOMO — $581 million) all announced resignations this week. Last month, the company’s Chief Operating Officer resigned after eleven months and in December 2022 the company’s CFO resigned. In addition, the company’s CEO departed in March 2022 and the Utah-based software company has fallen ~65% over the last year.
Chief Revenue Officer of Payoneer Global (NASDAQ: PAYO — $2.13 billion) departed after about one and a half years. Last month, the company’s CFO also departed after about twelve years and in May 2022 the company’s Chief Accounting Officer resigned. Moreover, in February 2022 the company’s Chief Technology Officer resigned, and in December 2021 the company’s Chief Strategy Officer resigned. In July 2021, The Bear Cave published on Payoneer and wrote that “Payoneer appears to transact in the high-risk corners of the internet, despite explicit denials about doing so.”
Chief Commercial Officer of Riot Platforms Inc (NASDAQ: RIOT — $1.14 billion) “is no longer employed” by the company after almost two years. In addition, the company’s CFO “retired” in August and the company’s Chief Operating Officer departed in April 2022.
Chief Accounting Officer of Palantir Technologies (NYSE: PLTR — $17.5 billion) “announced his decision to step down from his position, effective at 12:01 a.m. Mountain Standard Time one business day after the public filing of Palantir Technologies Inc.'s Form 10-K for the fiscal year ended December 31, 2022.”
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“The Man Who Moves Markets” (The Atlantic)
“The current DOJ investigation, which carries much higher stakes than a civil suit, has taken a different approach. According to sources familiar with the matter, the investigation is probing possible coordination surrounding the publication of short reports, looking for signs of market manipulation or other trading abuses. The focus is on trading activity, not the content of the reports.”
“Activision Blizzard to Pay $35 Million for Failing to Maintain Disclosure Controls Related to Complaints of Workplace Misconduct and Violating Whistleblower Protection Rule” (SEC)
“According to the SEC’s order, between 2018 and 2021, Activision Blizzard was aware that its ability to attract, retain, and motivate employees was a particularly important risk in its business, but it lacked controls and procedures among its separate business units to collect and analyze employee complaints of workplace misconduct. As a result, the company’s management lacked sufficient information to understand the volume and substance of employee complaints about workplace misconduct and did not assess whether any material issues existed that would have required public disclosure. Separately, the SEC’s order finds that, between 2016 and 2021, Activision Blizzard executed separation agreements in the ordinary course of its business that violated a Commission whistleblower protection rule by requiring former employees to provide notice to the company if they received a request for information from the Commission’s staff.”
“Adani Offshore Investor Has Links to Adani Family” (WSJ)
“Hindenburg founder Nate Anderson said the research firm scraped the entire corporate registry of Mauritius to build its own searchable database, allowing Hindenburg to query the names of listed directors or owners of the entities. Hindenburg said it began comparing details of the companies and finding correlations and similarities….”
Tweets of the Week
Until next week,
The Bear Cave