The Bear Cave #164
New Activist Reports, Recent Resignations, and Tweets of the Week
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New Activist Reports
“Akram’s Razor” published on Sprout Social (NASDAQ: SPT — $2.88 billion), a social media management software company. Akram’s Razor called the company a COVID-winner and claimed the company’s recent growth largely comes from Salesforce’s decision to sunset its social media management software product, which has led to a large migration of customers to Sprout Social. Akram’s Razor wrote, in part,
“Thanks to Sprout management hard selling this one-off revenue opportunity as an organic growth inflection and the current brutal market dynamics in the rest SaaS; the market has massively mispriced the stock.”
Akram’s Razor also raised additional concerns that Sprout Social’s software has become “commoditized” and that competitor Sprinklr (NYSE: CXM) is poised to take share going forward. Akram’s Razor concluded,
“The short offers 40%-60% downside over the next six months and is in my opinion the best risk/reward short in the entire SaaS sector.”
Kerrisdale Capital published a letter to the auditor and audit committee of C3.ai Inc (NYSE: AI — $2.56 billion), an enterprise AI software company. The letter addresses “highly conspicuous growth in unbilled receivables to levels we’ve never before seen in software companies, efforts to inflate gross profit margins by reclassifying costs of revenue as research and development expenses, [and] classification of significant revenue as subscription revenue that in actuality is consulting-oriented revenue” among other issues.
In March, Kerrisdale raised concerns about the company’s partnership with Baker Hughes and rising unbilled receivables.
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Barings BDC (NYSE: BBDC — $830 million) stepped down after just seven months “to pursue other business opportunities.” In December, both the firm’s CEO and Chief Compliance Officer resigned after just three months in their roles.
CFO of Woodward Inc (NASDAQ: WWD — $5.57 billion) “entered into a separation and release” after about one and a half years. The company has had four CFO transitions in the last five years.
CFO of Gulfport Energy (NYSE: GPOR — $1.43 billion) resigned after nearly two years. In March, the company’s Vice President of Operations was “terminated” and in January the company’s CEO resigned.
CFO of Sirius XM Holdings (NASDAQ: SIRI — $15.5 billion) stepped down after two and a half years “to pursue another opportunity at a publicly traded company outside the industry.”
CFO of Fox Factory Holding Corp (NASDAQ: FOXF — $4.72 billion) was “terminated without cause” after a little under three years. The company is audited by Grant Thornton LLP.
President of International at La-Z-Boy Incorporated (NYSE: LZB — $1.20 billion) “retired” after about one year. In the last two years, the company’s Chairman, Chief Operating Officer, CEO, and General Counsel have also all retired.
Calvin Broadus Jr., known professionally as Snoop Dogg, resigned from the board of FaZe Holdings (NASDAQ: FAZE — $35 million) “effective immediately” after about eight months. The company is down ~95% since its July 2022 SPAC merger.
Chief Operating Officer of North America at Americold Realty Trust (NYSE: COLD — $7.58 billion) resigned after about eight months “to pursue other professional interests.” The company’s Chief Investment Officer departed in July 2022 and the company’s Chief Operating Officer departed in March 2022.
Chief Accounting Officer of Amplitude Inc (NASDAQ: AMPL — $1.34 billion) resigned after two and a half years “to pursue another opportunity.” The company’s CFO also departed in February and the company has fallen ~80% since its October 2021 IPO.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Defense Contractor Fired Whistleblower for Reporting Accounting Irregularities” (American Prospect)
“A federal lawsuit filed last month accuses defense contracting conglomerate TransDigm of retaliating against a former vice president of finance at a subsidiary firm for calling attention to accounting practices she deemed improper, such as allegedly fiddling with transaction dates to meet quarterly revenue targets. The whistleblower says she was told not to inform anyone else at the company about her findings… ‘It was always understood that what was going on in the finance side of TransDigm was certainly clever. It was clever with a wink and a nod.’
…The former TransDigm employee told the Prospect that the targets were nonnegotiable. ‘The guys from Cleveland would sit down and you would tell them where you would finish the quarter and the year,’ the employee said. ‘Our [finance] guy always had extra money in a figurative sock somewhere. That’s what he called it, he called it his sock. If we were getting to the end of a fiscal quarter and things were getting tough, he’d pull out some reserve somewhere to get us over the line.’”
“Signature Bank Insiders Sold $100 Million in Stock During Crypto Surge” (WSJ)
“The extent of the executives’ sales was hard to determine in part because Signature filed the documents with the Federal Deposit Insurance Corporation, rather than the Securities and Exchange Commission, which is typical for companies of its size. Most banks of this size have their securities regulated by the SEC and file their forms there.
Signature was one of only two companies in the S&P 500 that didn’t file insider-trading transactions to the SEC. The other was First Republic Bank.”
“Jim Chanos’ Short-Only Fund, Ursus, Came Out on Top in 2022” (Institutional Investor)
“Chanos’ short-only fund, Ursus, gained 18 percent in 2022, compared with a negative 12 percent return in 2021, according to an individual familiar with the results… Meanwhile, Chanos’ hedged vehicle, Kynikos Capital Partners, gained 7 percent in 2022, compared with a 15 percent gain in 2021.”
Tweets of the Week
Until next week,
The Bear Cave