The Bear Cave #157

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

Feb 19

Welcome to The Bear Cave! Our last premium articles were “More Problems at Planet Fitness (PLNT)” published on February 2 and “Problems at The Beauty Health Co (SKIN)” published on February 16. The next premium investigation comes out Thursday, March 2.

The Bear Cave has some exciting investigations planned for the near future and is always looking for new ideas too. If you know of any companies that are misleading investors or harming customers, please hit reply and let us know!

New Activist Reports

Citron Research published on Etsy Inc (NASDAQ: ETSY — $16.3 billion), an e-commerce platform focused on handmade items and craft supplies. Citron said the company has “become one of the largest platforms in the world for counterfeit goods” and alleged the company repeatedly offers promoted listings to counterfeiters. For example, Citron showed that seven of the top eight listings for “Disney” appear to be counterfeit or knock-off products.

Wolfpack Research published on Goosehead Insurance (NASDAQ: GSHD — $1.52 billion), a fast-growing insurance broker. Wolfpack highlighted a high ~67% failure rate for new Goosehead franchisees along with a heavy reliance on home sales to generate insurance leads. In addition, Wolfpack found that management has sold around $600 million in Goosehead stock despite a cumulative net income of ~$23 million since the company’s 2018 IPO. Members of management include the company’s CEO and co-founder, Mark Jones, his son, the CFO, his wife, a Vice Chair, and his son-in-law, the company’s General Counsel.

Wolfpack Research also published a follow-up report on B. Riley Financial (NASDAQ: RILY — $1.23 billion), an investment bank and financial services company. Wolfpack highlighted that B. Riley lent ~$42 million to Sorrento Therapeutics (SRNE), which declared bankruptcy this week, and Wolfpack suggested another B. Riley borrower, Exela Technologies (XELA), could declare bankruptcy next week. Wolfpack also highlighted an unusual “informal, unwritten agreement” governing voting rights for a ~10% shareholder.

Gusty Winds Musing, an anonymous Substack, published on SmartRent Inc (NYSE: SMRT — $575 million), an enterprise smart home software platform. Gusty Winds Musing highlighted that the company’s largest customers appear to be LPs in one of the company’s largest VC shareholders – and those customers have dramatically lowered their SmartRent deals following stock sales by their VC fund. Gusty Winds Musing concluded,

“The company has a market cap of $570m. It has cash of $215m and no debt. So an EV of ~$350m. That puts it on ~11x EV/Sales of just the software business, and of course the company is losing substantial amounts of money from its installation services and operating expenses. It’s one of the most expensive software companies on the Nasdaq on those metrics and it loses ~$3 at the bottom line for every dollar of software revenue that it has… I think this is worth $0 and I am short.”

Viceroy Research published multiple new case studies on Medical Properties Trust (NYSE: MPW — $7.76 billion), a Birmingham-based REIT that owns hospitals typically in long-term sale-leaseback transactions. Among many issues, Viceroy alleged Medical Properties Trust has recently sold assets at distressed prices and alleged Medical Properties Trust’s largest tenant, Steward, has lied to reporters about a Maltese hospital joint venture.

Recent Resignations

Notable executive departures disclosed in the past week include:

CEO of Bally's Corp (NYSE: BALY — $990 million) “entered into a separation agreement” after about one and a half years and is also leaving the board. In March 2022, the company’s CFO resigned after three years “to pursue other interests and opportunities.”
CFO of EQT Corp (NYSE: EQT — $11.5 billion) “will cease to serve” the company after a little over three and a half years. The company’s prior CFO was “terminated without cause” after just eight months in August 2019.
CFO of Amplitude Inc (NASDAQ: AMPL — $1.64 billion) “will be departing Amplitude” after nearly four years. In February 2022, the company’s Chief Marketing and Strategy Officer resigned after one and a half years “to accept a senior-level executive position at a non-competitive private software company.” Amplitude is down ~75% since its October 2021 IPO.
CEO of Rocket Companies Inc (NYSE: RKT — $17.4 billion) notified the board of his intent to retire after nearly seven years. The company’s General Counsel and CFO also retired in October and November of last year.
CEO of Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI — $3.04 billion) is stepping down and will become Executive Chair after over 23 years. Muddy Waters and Jehoshaphat Research previously criticized the company for questionable accounting.
General Counsel of Sprinklr Inc (NYSE: CXM — $2.85 billion) resigned after three and a half years. In addition, the company’s Chief Revenue Officer, Chief Operating Officer, and Chief Financial Officer all departed the company in 2022.

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

Earnings to Watch

Some notable earnings announcements for the upcoming week include:

On Tuesday after the close, Coinbase (NASDAQ: COIN — $14.8 billion) reports results. In September 2022, The Bear Cave criticized the company’s “busted business model and failing leadership.”
On Thursday before the open, Planet Fitness (NYSE: PLNT — $6.95 billion) reports results. Last month, The Bear Cave criticized the company’s franchise network and wrote that “The Bear Cave is left wondering whether Planet Fitness is actually a thriving gym franchise or an illegal billing operation with gyms on the side.”
On Thursday before the open, Medical Properties Trust (NYSE: MPW — $7.76 billion) reports results. In October 2022, The Bear Cave uncovered “a haphazard assortment of issues including distressed tenants, dubious representations, excessive spending, potential auditor independence issues, and a perplexing undisclosed entity for property management.”
On Thursday after the close, Zeta Global Holdings (NYSE: ZETA — $1.97 billion) reports results. In May 2022, The Bear Cave called the company “a roll-up of low-quality marketing and data gathering companies.”

What to Read

“Missed signals: behind Trafigura’s $577mn loss on non-existent nickel” (FT)

“TMT was a reliable counterparty for years until early signs something might have been amiss appeared in 2021, when transit times for containers ballooned along with volumes of nickel traded. Some shipments took more than 300 days, many times more than necessary for any global shipping route, according to one person familiar with the matter.”

“Emails Reveal Deep Ties Between Jeffrey Epstein, Former Barclays CEO Jes Staley” (WSJ)

“‘I owe you much. And I deeply appreciate our friendship. I have few so profound,’ Mr. Staley emailed Epstein in 2009, according to court documents reviewed by The Wall Street Journal. That year, Epstein completed a sentence for soliciting a minor for prostitution.”

“AMC Networks Owner James Dolan Finds a New CEO: His Spouse” (WSJ)

“AMC Networks Inc Chairman James Dolan parted ways with the company’s last chief executive only three months into her tenure. Now he has found the next one: his wife, Kristin Dolan…”