The Bear Cave #160

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

Mar 12, 2023

Welcome to The Bear Cave! Our last premium articles were “Problems at The Beauty Health Co (SKIN)” published on February 16 and “Problems at Symbotic (SYM)” published on March 2.

Given recent events, The Bear Cave’s next investigation for paid readers will be published tomorrow at 10:30am ET. Tomorrow’s investigation will be a continuation of The Bear Cave’s past reporting on the crypto banking collapse as discussed in our November 2022 article “The Great Crypto Collapse” and our December 2022 article “Problems at Silvergate.”

New Activist Reports

Spruce Point Capital published on Essential Utilities Inc (NYSE: WTRG — $11.0 billion), a roll-up of water and natural gas assets. Spruce Point said the company is in a “declining phase of its growth story as its aggressive price increases and numerous snafus in billing, service, and water quality have created an environment of public outrage.” Spruce Point also raised concerns about the company’s financial reporting and recent debt-laden acquisition of a natural gas company.

Kerrisdale Capital published on C3.ai Inc (NYSE: AI — $2.39 billion), an enterprise AI software company. Kerrisdale called the company “a no-growth, cash-burning industry flop with poor economics, a tenuous competitive position and dismal value proposition.” Kerrisdale alleged the company’s partnership with Baker Hughes “is falling apart” as evidenced by contract modifications and the resignation of Baker Hughes’s CEO from C3’s board. In addition, Kerrisdale highlighted that the company’s top three customers represent over half the company’s sales and noted that unbilled receivables have gone up ~400% in the last five quarters.

In February 2022, Spruce Point also published on C3 and noted the company “has a pattern of exaggerated business claims and is using multiple strategic partnerships… to project an aura as a successful enterprise.”

Blue Orca Capital published on Piedmont Lithium (NASDAQ: PLL — $1.06 billion), a lithium mining company. Blue Orca said it “found evidence that [the company’s] mining licenses in Ghana were obtained through what appears to be textbook corruption.” Blue Orca alleged the company’s joint venture paid millions of dollars to “a Ghana-based company secretly owned by the son of General Mosquito, a high-ranking politician who has strong influence in the mining sector.” Blue Orca noted that many countries revoke mining rights obtained through bribery and the company will likely not be able to produce lithium in the near future.

Kryptonite Value, a new activist short firm, published a Twitter thread on Ambrx Biopharma (NYSE: AMAM — $374 million), an early-stage biologics company. Kryptonite Value said the company “appears to be a classic pump and dump” and highlighted management’s checkered past. For example, the company’s CEO, Daniel O'Connor, previously served as CEO of Oncosec Medical (ONCS), which subsequentially fell ~99%, and was a founding director of Seelos Therapeutics (SEEL), which also subsequentially fell ~99%, and before that served as CEO of Advaxis (ADXS), which also subsequently fell ~99%. Ambrx Biopharma stock is currently up roughly 2,000% from its December 2022 lows and Kryptonite Value predicted the company will “be a near worthless penny stock soon enough.”

Viceroy Research published another follow-up report on Medical Properties Trust (NYSE: MPW — $5.26 billion), a Birmingham-based REIT that owns hospitals typically in long-term sale-leaseback transactions. Viceroy alleged that Medical Properties Trust’s March 2022 joint venture with Macquarie Asset Management “was designed to disguise MPW’s true debt, and provided short-term liquidity to cover MPW dividend payments.”

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of Mr. Cooper Group (NASDAQ: COOP — $2.90 billion) resigned after eleven months. The company has had five different CFOs in the last five years.
CEO of Domo Inc (NASDAQ: DOMO — $427 million) resigned after one year and also left the board. Last month, three board members announced resignations and in January the company’s Chief Operating Officer resigned after eleven months. In addition, the company’s CFO resigned in December 2022. The Utah-based software company has fallen ~70% over the last year.
CFO of Helen of Troy Limited (NASDAQ: HELE — $2.45 billion) resigned “to pursue a new opportunity” after one and a half years. The company is audited by Grant Thornton LLP and was a top short idea of prolific short-seller Marc Cohodes in a January Hedgeye interview.
CFO of Allbirds Inc (NASDAQ: BIRD — $187 million) resigned after two years. The company is down ~95% since its November 2021 IPO.
CEO of Blackline Inc (NASDAQ: BL — $3.63 billion) “mutually agreed” to cease serving as CEO and resigned from the board after a little over two years.
CFO of Stitch Fix (NASDAQ: SFIX — $526 million) resigned after a little over two years “to pursue another opportunity.” The company has had three different CEOs and three different CFOs in the last five years.
CFO of Greenlight Capital Re (NASDAQ: GLRE — $338 million) departed after two and a half years. In addition, the company’s Chief Compliance Officer “separated” in December.
CFO of Semrush (NYSE: SEMR — $1.10 billion) stepped down after nearly four years. In addition, the company’s Chief Revenue Officer retired in February 2023, the company’s Chief Operating Officer resigned in June 2022, and the company’s Chief Human Resources Officer was “terminated” in July 2021. The company is down ~35% since its March 2021 IPO.
CFO of Global Business Travel Group (NYSE: GBTG — $2.95 billion) resigned after six years “to take a position outside the company.” The company is down ~35% since its May 2022 SPAC merger.
Chief Operating Officer of Embark Technology (NASDAQ: EMBK — $58 million) resigned after one year. Last week, the company announced it was “unable to identify a path forward for the business in its current form” and said it would wind down. The company has fallen ~99% since its November 2021 SPAC merger and was previously criticized by The Bear Cave because it “holds no patents, has only a dozen or so test trucks, and may be more bark than bite.”
Chief Accounting Officer of Enstar Group (NASDAQ: ESGR — $3.71 billion) resigned after almost two years. The company has had four different CFOs in the last three years.

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

What to Read

“Silicon Valley Bank paid out bonuses hours before seizure” (Axios)

“Silicon Valley Bank on Friday paid out annual bonuses to eligible U.S. employees, just hours before the bank was seized by the U.S. government, Axios has learned from multiple sources…”

“Abundance Begets Failure” (John Maxfield)

“SVB failed fast. Two days earlier, after telling analysts for months that it didn’t need to sell assets, SVB jettisoned most of its available-for-sale securities and locked in a $1.8 billion loss. With that went any semblance of confidence in the bank. By the end of the next day, depositors had withdrawn $42 billion and sealed the bank’s fate…”

“JPMorgan Sues Former Executive Jes Staley Over Jeffrey Epstein Ties” (WSJ)

“JPMorgan’s move to try to shift the focus to Mr. Staley represents a break with a former executive who had risen to the top of the bank and was once considered a possible successor to Chief Executive Jamie Dimon…”