The Bear Cave #168
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Hercules Capital (HTGC)” and “Problems at TriplePoint Venture Growth BDC (TPVG)” and our next premium investigation comes out Thursday, May 18.
New Activist Reports
Hindenburg Research published on Icahn Enterprises (NASDAQ: IEP — $13.4 billion), a conglomerate controlled by ~85% owner Carl Icahn. Hindenburg wrote, in part,
“Our research has found that IEP units are inflated by 75%+ due to 3 key reasons: (1) IEP trades at a 218% premium to its last reported net asset value, vastly higher than all comparables (2) we’ve uncovered clear evidence of inflated valuation marks for IEP’s less liquid and private assets (3) the company has suffered additional performance losses year to date following its last disclosure.”
Hindenburg also alleged that IEP’s unsustainably high ~16% dividend yield enticed retail investors to buy IEP’s stock offerings, proceeds of which are used to fund the dividend. Hindenburg wrote,
“Since 2019, one bank has run all of IEP’s $1.7 billion in ATM offerings: Jefferies. In essence, Jefferies is luring in retail investors through its research arm under the guise of IEP’s ‘safe’ dividend, while also selling billions in IEP units through its investment banking arm to support the very same dividend.”
Following the report, IEP shares fell roughly 25% and rival hedge fund manager Bill Ackman tweeted that “there is a karmic quality to this short report that reinforces the notion of a circle of life and death.”
Spruce Point Capital published on DoubleVerify Holdings (NYSE: DV — $4.47 billion), an advertising efficacy measurement company. Spruce Point raised “grave concerns about the accuracy of its financial reporting to investors, efficacy of its product suite, and the sustainability of its growth story.” Specifically, Spruce Point highlighted changes in how the company accounts for billing disputes with customers. Spruce Point also said it was long competitor Integral Ad Science (NASDAQ: IAS — $2.56 billion) which “offers superior value through better positioning to faster growing foreign markets.”
Bleecker Street Research published on Atlas Lithium (NASDAQ: ATLX — $161 million), a lithium exploration company. Bleecker Street called the company “a rebranding of Brazil Minerals, a gold and diamond mining company that fell 90% after notorious stock promoters touted it. Last year it pivoted to lithium.” Bleecker Street also called Atlas “the most overvalued lithium mining company in the world” given that shares have risen over 300% in the last year.
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Proterra Inc (NASDAQ: PTRA — $331 million) resigned after one and a half years. A director and the Chief Legal Officer also both resigned in March and the company is down ~85% since its June 2021 SPAC merger.
CFO of Lavoro Limited (NASDAQ: LVRO — $662 million) resigned after two years “to pursue other opportunities.” The company is down ~45% since its February 2023 SPAC merger.
Chief Credit Officer of Premier Financial Corp (NASDAQ: PFC — $527 million) departed after one year based on data from form 3s tracked by VerityData. In December, the bank’s Chief Lending Officer also resigned “to pursue a financial institution leadership opportunity.”
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Exclusive: US officials assessing possible 'manipulation' on banking shares” (Reuters)
“U.S. federal and state officials are assessing whether ‘market manipulation’ caused the recent volatility in banking shares, a source familiar with the matter said on Thursday, as the White House vowed to monitor ‘short-selling pressures on healthy banks.’”
“Charlie Munger: US banks are ‘full of’ bad commercial property loans” (FT)
“On his own imprint on the world, Munger said: ‘I would like my legacy to be a more relentless determination to develop and use what I call an uncommon sense.’”
“SEC Issues Largest-Ever Whistleblower Award” (SEC)
“The Securities and Exchange Commission today announced the largest-ever award, nearly $279 million, to a whistleblower whose information and assistance led to the successful enforcement of SEC and related actions. This is the highest award in the SEC’s whistleblower program’s history…
‘The whistleblower’s sustained assistance including multiple interviews and written submissions was critical to the success of these actions,’ said Creola Kelly, Chief of the SEC’s Office of the Whistleblower. ‘While the whistleblower’s information did not prompt the opening of the Commission’s investigation, their information expanded the scope of misconduct charged.’”
Tweets of the Week
Until next week,
The Bear Cave