The Bear Cave #158

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

Feb 26, 2023

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 this Thursday, March 2.

New Activist Reports

Bonitas Research published on Harrow Health Inc (NASDAQ: HROW — $502 million), a pharmaceutical company focused on products related to eye surgeries. Bonitas called the company “an unprofitable stock promotion neglecting risk disclosures and quality control standards.” Specifically, Bonitas highlighted an August 2022 Department of Justice subpoena concerning the company’s sales and marketing, a June 2022 FDA Warning Letter concerning false and misleading marketing claims, and an August 2022 FDA Form 483 inspection report concerning unsanitary drug manufacturing conditions. Bonitas concluded,

“With significant liabilities managed by bad actors willing to enrich themselves at the expense of minority HROW shareholders, we are short Harrow and think its stock is going lower.”

Jehoshaphat Research published on Techtronic Industries (Hong Kong: 0669 — HKD$144 billion), a power tool and outdoor equipment company. Jehoshaphat Research accused the company of widespread accounting fraud, primarily by “snowballing expenses into assets for over a decade [which results in] billions of dollars of assets [that] appear on the balance sheet that don’t really ‘exist’ except in an accounting sense.” Jehoshaphat Research alleged the company’s accounting fraud has resulted in suspiciously stable and growing margins for a seasonal business and recent layoffs imply the “tide is going out” on the company.

Storm King Reports published on Intra-Cellular Therapies (NASDAQ: ITCI — $4.48 billion), a cellular biopharmaceutical company. Storm King alleged that the company’s flagship drug used to treat schizophrenia and bipolar depression, Caplyta, “may be much cloudier than Intra-Cellular is letting on.” Specifically, Storm King highlighted a high number of adverse events reports filed with the FDA about the drug including the sensation of “being boiled alive.”

Storm King Reports is a new activist research firm by prolific financial journalist Roddy Boyd.

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of SciPlay Corp (NASDAQ: SCPL — $2.07 billion) resigned after less than three months on the job. The company’s Chief Accounting Officer also retired in November 2021 after just two and a half years.
CEO of Belden Inc (NYSE: BDC — $3.59 billion) resigned “for personal reasons” after almost three years and is also leaving the board. The company’s Vice President of Human Resources departed in March 2022 and the company’s CFO resigned in February 2021 “to pursue other endeavors.”
CFO of Banc of California (NYSE: BANC — $1.03 billion) departed after about three years. In December, the Chief Risk Officer also departed after about three and a half years.
Sridhar Srinivasan, a board member of RingCentral (NYSE: RNG — $3.34 billion), resigned “effective immediately” after just three months. Last month, another board member resigned “to avoid any appearance of a conflict of interest given her new role as a Senior Advisor to the corporate advisory business of Evercore Group.”
Chief Legal and Compliance Officer of WeWork Inc (NYSE: WE — $902 million) is leaving “to pursue other opportunities” after just two years. Since the company’s October 2021 SPAC merger, the company’s Chief People Officer, Executive Chairman, CFO, and five board members have resigned.
Chief Legal Officer of Jeld-Wen Holding Inc (NYSE: JELD — $1.08 billion) retired after three and a half years. The company has had four different CEOs and four different CFOs in the last five years.
Chief Operating Officer and co-founder at Medical Properties Trust (NYSE: MPW — $6.32 billion) retired after 20 years. The Bear Cave previously published on the company and highlighted “a haphazard assortment of issues including distressed tenants, dubious representations, excessive spending, potential auditor independence issues, and a perplexing undisclosed entity for property management.”

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 before the open, Playtika Holding Corp (NASDAQ: PLTK — $3.34 billion) reports results. In November 2021, The Bear Cave criticized the company for declining game quality and profiting off gambling addicts. And in December 2022, a board member resigned citing “significant deficiencies in the company’s current governance practices.”
On Tuesday before the open, The Beauty Health Co (NASDAQ: SKIN — $1.49 billion) reports results. The Bear Cave recently highlighted robust competition as well as multiple customers that appear defunct, nonexistent, no longer carrying the company’s product, or carrying a competitor’s offering.
On Tuesday before the open, eXp World Holdings (NASDAQ: EXPI — $1.91 billion) reports results. In April 2022, The Bear Cave wrote, “the company’s rise has been matched with dubious accounting, regulatory snafus, an SEC subpoena, high insider selling, and a questionable recruiting pipeline promoted by a prominent Scientologist.”

What to Read

“Hedge Fund Billionaire Extracts Billions More to Retire” (NYT)

“Neither Mr. Dalio, known for his creed of ‘radical transparency,’ nor Bridgewater said at the time, or since, that he had hardly gone without a fight. His exit — partly spurred by controversial remarks he had made on television about China’s human rights record — followed more than six months of frantic behind-the-scenes wrangling over how much money his successors at the firm were willing to pay the billionaire to go away.”

“Ozy Media, CEO Carlos Watson Charged With Fraud” (WSJ)

“Messrs. Watson and Rao also agreed for Mr. Rao to impersonate a cable network executive in 2020 through a fake email address in an attempt to secure a loan from a bank, according to the indictment. Earlier, the two men conspired to have Mr. Rao send the bank a copy of a fake contract between Ozy and the unnamed cable network, according to the indictment. When Ozy’s then-chief financial officer learned of the plan, she resigned immediately, prosecutors said.
‘To be crystal clear, what you see as a measured risk—I see as a felony,’ the departing executive wrote in an email, according to the indictment.”

LiveWire Group 8-K Filing (SEC)

“Prior to the completion of its business combination transaction, LiveWire Group, Inc.’s wholly-owned subsidiary, STACYC, delivered to a customer electric balance bikes without batteries, which were shipped separately a short time later. The Company has determined that it had prematurely recognized revenue at the time of delivery of the bikes of approximately $1.1 million and $1.8 million in the first and second quarters of 2022, respectively, with a related understatement of revenue in the third quarter of 2022…”