The Bear Cave #166
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Airbnb (ABNB)” and “Problems at Hercules Capital (HTGC)” and our next premium investigation comes out Thursday, May 4.
New Activist Reports
HoldCo Asset Management, an investment firm based in Fort Lauderdale, published an 85-slide presentation on US Bancorp (NYSE: USB — $51.3 billion), the fifth largest U.S. bank. HoldCo called US Bancorp “the unsafest and unsoundest of them all” and argued that lax regulations allowed US Bancorp to “[load] up on mortgage-backed securities that plummeted in value when interest rates rose.” HoldCo emphasized that “USB’s capital ratios fall significantly short of its largest competitors” and wrote,
“The fifth largest bank in the country – an undeniably systemically important bank that carries a national deposit footprint spanning a majority of states – has been allowed by the Fed to hold shockingly low amounts of capital relative to assets.”
HoldCo Asset Management also argued close peer Wells Fargo was better capitalized and disclosed,
“A fund managed by HoldCo has purchased common stock of WFC and holds a short position in USB through selling short and purchasing put options relating to USB common stock.”
Spruce Point Capital published on Nuvei Corp (NASDAQ: NVEI — $5.85 billion), a global payments company based in Montreal. Spruce Point raised concerns about actor Ryan Reynolds’ “investment” in the company which may have just been a stock grant, noted the company’s ties to FTX including hiring FTX’s former head of payments, and criticized the company’s recent acquisition of Paya as overpaying for growth.
Spruce Point previously published on the company in December 2021 and raised concerns about “suspiciously expanded margins” and the integrity of the management team.
Jehoshaphat Research published on Universal Display Corporation (NASDAQ: OLED — $6.70 billion), a manufacturer of LED technology for smartphones and other technology. Jehoshaphat said the company “is using aggressive accounting to obscure revenue declines since its key patent expired in 2020” and wrote,
“OLED uses complex, long-term contract accounting to come up with its revenues. We believe the company has abused the flexibility of this accounting model to pull tomorrow’s revenues into today. This is how you turn 2020’s patent cliff into 2023’s revenue cliff. We expect OLED to miss 2023 expectations by a wide margin because the accounting ‘cookie jar’ that has enabled these accounting games has run out.”
Blue Orca Capital published on Shift4 Payments (NYSE: FOUR — $5.43 billion), a payments company focused on retail, hospitality, and restaurants. Blue Orca wrote,
“We see Shift4 as, in reality, a roll-up of low-tech POS systems and payment processors which is substantially less profitable, generates far less cash, and is materially more levered than investors are led to believe.”
In particular, Blue Orca alleged the company engaged in accounting games by acquiring resellers, and alleged that “Shift4’s CEO engaged in stock promotion.”
In response, Shift4’s CEO published an open letter and wrote that “insourcing distribution was a fantastic way to improve the customer experience” and said that the only reason his shareholdings went down was a stock donation to St. Jude Children’s Research Hospital. The response letter concludes,
“We plan to have a detailed discussion of our Q1 operating results and financial performance in two weeks. For those betting against us, keep in mind May 4th is just around the corner.”
Recent Resignations
Notable executive departures disclosed in the past week include:
Bradley J. Muth, CEO of both Transcontinental Realty Investors (NYSE: TCI — $318 million) and American Realty Investors (NYSE: ARL — $291 million), “ceased to be and resigned as President and Chief Executive Officer” of both companies after a little over one year.
CFO of Mondee Holdings (NASDAQ: MOND — $827 million) resigned after one and a half years “to pursue other opportunities.” The company is roughly flat since its July 2022 SPAC merger.
CFO of PLDT Inc (NYSE: PHI — $4.84 billion), formerly known as the Philippine Long Distance Telephone Company, retired after eight years. The company also disclosed the departure of the Chief of Procurement and two other Vice Presidents. Four board members have also resigned in the last two years.
CFO of Malibu Boats (NASDAQ: MBUU — $1.17 billion) resigned after nearly fourteen years “to pursue a similar role at a private equity-backed private company.”
Chief Operating Officer of FOXO Technologies (NYSE: FOXO — $16 million) resigned after three months “to pursue other opportunities.” The company is down ~95% since its September 2022 SPAC merger.
Chief Retail Officer of BRC Inc (NYSE: BRCC — $1.07 billion) resigned after a little over one year “to pursue other opportunities.” The company is down ~50% since its February 2022 SPAC merger.
Arthur J. Rubado III, board member of Sterling Check Corp (NASDAQ: STER — $1.08 billion), retired after about two years. Two additional board members have departed in the last four months.
Chief Technical Officer of Allogene Therapeutics (NASDAQ: ALLO — $782 million) resigned after five years “to pursue other opportunities.” In March, the company’s General Counsel resigned “to pursue other opportunities” and in December 2022 the company’s President of Research and Development resigned “to pursue another opportunity.”
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Statement on Alternative Trading Systems and the Definition of an Exchange” (SEC)
“Make no mistake: many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws.
As I’ve said numerous times, the vast majority of crypto tokens are securities. As Justice Thurgood Marshall put it so well, ‘Congress’s purpose in enacting the securities laws was to regulate investments, in whatever form they are made and by whatever name they are called.’”
“The World’s Richest Person Auditions His Five Children to Run LVMH, the Luxury Empire” (WSJ)
“Mr. Arnault, 74, currently the world’s richest person, has spent decades grooming his children to run LVMH. He drilled them in mathematics growing up and brought them along on business trips and negotiations. Today, Mr. Arnault is tightening the family’s grip on LVMH, parachuting his children into senior roles and empowering them to one day take over the luxury empire.”
“JPMorgan’s Ties to Jeffrey Epstein Were Deeper Than the Bank Has Acknowledged” (WSJ)
“JPMorgan Chase had ties to Jeffrey Epstein that ran deeper than the bank has acknowledged and extended years beyond when it decided to close the convicted sex offender’s accounts, according to people familiar with the matter.
Mary Erdoes, a top lieutenant to Chief Executive Jamie Dimon, made two trips to Epstein’s townhouse on Manhattan’s Upper East Side, in 2011 and 2013, when Epstein still was a client of the bank, said the people familiar with the matter. She exchanged dozens of emails with him and discussed sharing with him fees related to a charitable fund the bank was considering launching, the people said.”
Tweets of the Week
Until next week,
The Bear Cave