🐻The Bear Cave #17🐻

New Activist Reports, Blast From The Past, What to Read, and Tweets of the Week

Jun 08, 2020

The Bear Cave will publish an exclusive investigation into a $1 billion+ company at 10:47 am ET on Thursday, June 11. Mark your calendars and tell your friends to get on our email list.

New Activist Reports

OSS Research, a new activist, published on Tactile Systems (NASDAQ: TCMD — $1.01 billion), a medical device maker. OSS Research alleged Tactile Systems was involved in a “kickback scheme” to sell its products.

Grizzly Research published an update on GSX Techedu (NYSE: GSX — $9.67 billion) with “Definitive Evidence of Highly Inflated Top line Revenue.” GSX was previously criticized by Citron Research, Grizzly Research, The Bear Cave, a Chinese YouTube channel, and a Chinese Fund. GSX shares are up about 71% YTD.

Grizzly Research also called Hebron Technology (NASDAQ: HEBT — $222 million) “An Insider Enrichment Scheme without Economic Basis.” Shares are up 1,500% over the last twelve months.

Hindenburg Research published, “A Bagholder’s Guide to Why We Think Genius Brands Will Be a $1.50 Stock Within a Month” (NASDAQ: GNUS — $572 million). Hindenburg wrote,

“The stock currently trades at a fully diluted market cap of ~$1.56 billion, affording it a ludicrous revenue multiple of 1,201x based on its $1.3 million in annualized revenue. The company has generated losses every quarter for almost 10 straight years.”

GNUS stock is up nearly 2,000% YTD.

Muddy Waters Capital published an update on eHealth (NASDAQ: EHTH — $3.03 billion), a marketplace for health insurance. In its original report, Muddy Waters wrote, “[eHealth’s] highly aggressive accounting masks what we believe is a significantly unprofitable business.” In its update Muddy Waters added more detailed criticism:

“EHTH assumes an average Medicare Advantage member life of approximately three years when it books revenue for a given customer cohort. However, gross cash inflows take much longer than three years to match the revenue EHTH recognizes.”

Culper Research published on VBI Vaccines (NASDAQ: VBIV — $461 million) writing, “we believe that the Company is effectively an “empty box” stock promotion and shares are worthless.”

White Diamond Research criticized Riot Blockchain (NASDAQ: RIOT — $90 million), a bitcoin mining company.

Citron Research expressed skepticism of the recent movement in American Airlines (NASDAQ: AAL — $7.86 billion), which was up 70% last week. According to robintrack.com the number of Robinhood users who owned AAL stock has gone up from about 12,000 in February to over 600,000 today.

Citron Research @CitronResearch

$AAL. To clarify previous tweet the 25k new users on Robin Hood who bough stock at $19 must know more about airlines than Buffet who sold the stock at $11. Send your resumes to Omaha. Expect stock to trade back to $10

Blast from the Past

Last week I highlighted two companies as stocks to watch going into earnings.

Smartsheet (NYSE: SMAR — $5.32 billion), where I noted abundant accounting red flags, fell 22% last week after the company posted disappointing earnings and guidance.

Yext (NYSE: YEXT — $1.92), which I believed had a lot of customers hard hit by coronavirus, fell on weak guidance, but still ended the week up 3%.

Two months ago I interviewed Marc Cohodes and he recommended buying Camping World (NYSE: CWH). He predicted low gas prices, low interest rates, and coronavirus would lead to an increase in Camping World RV sales. Since then the stock has gone from $8 to $22. (Full Disclosure: I own CWH stock). For more of his ideas follow him on Twitter @AlderLaneeggs

What to Read

“Investors Seem to Know About Activist Campaigns Before They Happen. Should They?” (Institutional Investor)

“A recent study, focused on the usage of the SEC’s regulatory filing system, suggests hedge funds are sharing information with peers… the study was based on public records showing the IP addresses that accessed the SEC’s online database of financial records…”

“Ex-Enron CEO Skilling launching new digital marketplace for oil investors” (Reuters)

“Former Enron CEO Jeffrey Skilling, released last year after a 14-year prison term stemming from the energy firm’s collapse, is raising funds to launch a digital marketplace catering to professional oil and gas investors.”

“Chicken Industry Executives, Including Pilgrim’s Pride CEO, Indicted on Price-Fixing Charges” (WSJ)