The Bear Cave #162
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Symbotic (SYM)” and “More Problems at Coinbase (COIN)” and our next premium investigation comes out Thursday, April 6.
New Activist Reports
Hindenburg Research published on Block Inc (NYSE: SQ — $36.5 billion), a financial technology company focused on the underbanked demographic. Hindenburg primarily focused on the company’s Cash App subsidiary and concluded the company “systematically exploits the demographics it claims to help.” Hindenburg alleged Cash App inflated metrics by allowing an individual to have more than one account and alleged the company turned a blind eye to criminal activity facilitated on its app. As evidence, Hindenburg ordered a Cash App card under the name “Donald J Trump” and published a collection of rap lyrics mentioning Cash App with lines including:
“I paid them hitters through Cash App… we stuffin’ bodies in trash bags…”
“Junkie with the drugs, I bought some [drugs] through my Cash App…”
“F*** rap, moving ounces on the Cash App…”
Hindenburg also noted Cash App’s high fees of up to 1.75% for instant deposits and raised concerns about late fees with “APR equivalents as high as 289%” for Block’s Afterpay subsidiary.
Block stock fell ~17% this week and the company responded, in part,
“We intend to work with the SEC and explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about our Cash App business today…”
Kerrisdale Capital published on Uranium Energy Corp (NYSE: UEC — $1.02 billion), an environmentally friendly Uranium mining company. Kerrisdale called the company “a classic junior mining promotion… [that] acquires uneconomic uranium assets to trick retail investors into thinking it’s a legit miner.” Kerrisdale concluded,
“Altogether, UEC’s nameplate uranium resources massively overstate the uranium UEC can hope to actually extract from its deposits. But then again, we don’t think UEC ever intends to mine and sell uranium – rather, it exists to sell shares.”
Grizzly Research published on Sigma Lithium (NASDAQ: SGML — $3.47 billion), an early-stage lithium mining company. Grizzly Research alleged the company has “bogus feasibility studies” and would face production delays in part due to Brazilian licensing issues. Grizzly Research speculated the company could have value in an acquisition, but only at prices ~50-75% below its current market value.
Guasty Winds Musing, an anonymous short-focused Substack, published on Presto Automation (NASDAQ: PRST — $110 million), a restaurant technology company. Guasty Winds debunked the company’s claims of “proprietary AI” tech and showed the company largely makes gaming tablets for restaurants. Guasty Winds alleged the company engaged in non-economic deals to show revenue growth and has lost roughly $200 million since its inception in 2008. The company has fallen ~80% since its September 2022 SPAC merger.
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO of AERWINS Technologies (NASDAQ: AWIN — $46 million) resigned after nine months. The company is down ~90% since its February 2023 SPAC merger.
CFO of TTEC Holdings (NASDAQ: TTEC — $1.69 billion) resigned after one and a half years “to pursue another opportunity.”
CFO of Trupanion (NASDAQ: TRUP — $1.57 billion) resigned after a little less than two years. The company’s Vice President of Pricing and Vice President of Legal both also “ceased to provide services to the company” this week.
CFO of Papa John's (NASDAQ: PZZA — $2.64 billion) “will step down” after two and a half years. Earlier this month the company’s Chairman, Jeffrey C. Smith of Starboard Value LP, resigned “effective immediately.” Papa John’s Chief Operating Officer and Chief People Officer have also both resigned in the last five months.
President of Commercial Operations at BigBear AI Holdings (NYSE: BBAI — $265 million) was “terminated” after one and a half years. In January, Iceberg Research alleged the company was issuing spurious press releases regarding a U.S. Airforce contract to inflate its stock.
Chief Accounting Officer of SomaLogic (NASDAQ: SLGC — $437 million) “agreed to a transition plan” after one and a half years. In addition, the company’s Chief Operating Officer departed in August 2022 and the company has fallen ~80% since its September 2021 SPAC merger.
Chief Accounting Officer of Aris Water Solutions (NYSE: ARIS — $461 million) retired after two years. In September 2022, the company’s CFO also departed after just one and a half years and the company is audited by BDO LLP.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“First Republic Bank Founder Earned a Big Pay—As Did His Family Members” (WSJ)
“A consulting company owned by Mr. Herbert’s brother-in-law earned $2.3 million for advisory work related to its ‘investment portfolio, risk management, interest rate and economic outlook and other financial matters’ in 2021, it said in an annual proxy filing filed last spring. First Republic also paid Mr. Herbert’s son $3.5 million to oversee a lending unit at the bank, the disclosures said. The two family members were paid similar amounts in 2020.”
“Short seller warned US regulator about Signature Bank in January” (FT)
“‘SBNY has played a central role as a facilitator, even if unwitting, for countless illegal crypto transactions,’ Marc Cohodes wrote in the letter, which has been seen by the Financial Times.”
“The Ten Commandments of Banking” (Maxfield on Banks)
“Mistakes have been the rule rather than the exception at many major banks. Most have resulted from a managerial failing that we described last year when discussing the institutional imperative: the tendency of executives to mindlessly imitate the behavior of their peers, no matter how foolish it may be to do so.”
Tweets of the Week
Until next week,
The Bear Cave