Welcome to The Bear Cave! Our last premium articles were “Problems at Allegro MicroSystems (ALGM)” and “Problems at Palantir Technologies (PLTR)” and our next premium investigation comes out this Thursday, June 15.
New Activist Reports
Hindenburg Research published on Tingo Group (NASDAQ: TIO — $193 million), a New Jersey conglomerate that claims to have phone services, food processing, and e-commerce businesses in Nigeria. Hindenburg said, “We believe the company is an exceptionally obvious scam with completely fabricated financials.” For example, Tingo’s new food division allegedly generated over $500 million in revenue last quarter with ~25% operating margins that “exceed those of every major comparable food company” despite the fact the company “has no food processing facility of its own.” Hindenburg also highlighted multiple concerns about the company’s founder, Dozy Mmobuosi, who allegedly lied about his education credentials and in 2017 “was arrested and faced an 8-count indictment over the issuance of bad checks.”
In addition, Tingo’s co-chairman resigned in April 2023 “effective immediately” and in a nearly unprecedented resignation letter said he “will not be in a position to approve the 10K for 2022 prepared by management.”
Muddy Waters Research published an update on Chinook Therapeutics (NASDAQ: KDNY — $1.60 billion), a drug development company focused on kidney diseases. The Muddy Waters update shows “a larger pattern of deception, extending beyond trial data to financial reporting,” largely by inflating figures at a Chinese subsidiary.
Jehoshaphat Research published an update on Techtronic Industries (Hong Kong: 0669 — HKD$136 billion), a power tool and outdoor equipment company. Jehoshaphat said it believed Techtronic “is earning hundreds of millions in profits by defrauding Home Depot” by falsely labeling product as “factory blemished” to spuriously make it eligible for sale through a network of Techtronic-owned outlet stores. In effect, Techtronic would allegedly label its own Home Depot-branded products as “blemished” in order to earn more selling them through its own outlet stores. In February 2023, Jehoshaphat Research accused the company of widespread accounting fraud.
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Orchestra BioMed Holdings (NASDAQ: OBIO — $506 million) resigned after one and a half years. The company is up ~40% since its January 2023 SPAC merger.
CFO of SomaLogic (NASDAQ: SLGC — $487 million) “has left the company” after almost two years.” In March, the company’s CEO resigned after four and a half years “to pursue other opportunities” and the company’s Chief Accounting Officer “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 ~75% since its September 2021 SPAC merger.
CEO of GameStop (NYSE: GME — $6.91 billion) was “terminated effective immediately” after two years and is also leaving the board. In July 2022, the company’s CFO was “terminated without cause” after just one year.
CEO of LiveWire Group (NYSE: LVWR — $2.03 billion) resigned after about three and a half years. The company is roughly flat since its September 2021 SPAC merger after being spun out of Harley Davidson (NYSE: HOG).
CFO of Chemours Co (NYSE: CC — $4.78 billion) resigned after four years. And in January, Bradley Bell resigned from the company’s board and governance committee due to a disagreement over “the introduction of medical benefits for employees and their dependents to cover transgender procedures, abortions and, beginning in 2023, travel benefits for those needing to travel more than 100 miles to obtain such medical services.”
Chief Legal Officer of Lyell Immunopharma (NASDAQ: LYEL — $694 million) resigned after nine months and entered into a “release and separation agreement.” The company’s CEO also resigned in December and the company is down ~80% since its June 2021 IPO.
Principal accounting officer of Symbotic (NASDAQ: SYM — $23.9 billion) resigned after a little less than a year. The company is up over 300% since its June 2022 SPAC merger and in March 2023 The Bear Cave said the company was “more bark than bite and has a long way to fall.”
Chief Revenue Officer of Digital Realty Trust (NYSE: DLR — $30.4 billion) was “terminated without cause” after four and a half years. In March, the company’s Chief Accounting Officer resigned after two and a half years, in January the company’s Chief Operating Officer was terminated after five years, and in December the company’s CEO was “terminated without cause effective immediately” after eight years. In addition, two board members decided to not stand for re-election this year and this week Laurence Chapman resigned from the board and governance committee “effective immediately.”
According to the company’s 8-K, Mr. Chapman provided an initial resignation letter that he later withdrew and replaced with a second resignation letter raising more concerns. Mr. Chapman wrote to Chairwoman Mary Hogan Preusse and said, in part,
“My disagreement is solely with governance policy and practices, and I am concerned that the loss of a healthy governance environment has had and continues to have a negative impact on the company… Directors need to be comfortable discussing anything in the board room without a concern that it will be leaked inappropriately.”
The letter also continued,
“Within Digital there are several relationships that have the potential to impact real or perceived objectivity and independence. You and Mark [another board member] are close personal friends and you used to work for Mark. You are both full time professional directors whose primary source of income is from director’s fees, you both serve on four REIT boards, you both attend the same NAREIT conferences and deal with the same REIT investment community, and you are both very likely to be contacted as a reference for the other when you seek positions on other REIT boards. Andy Power used to work for Mark and now serves as a director at Americold where Mark is chairman. Greg Wright used to work for Mark, they are personal friends and Greg now serves as a director at Paramount where Mark is also a director…”
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Even Mark Cuban Can’t Fix This Broken Drug System” (WSJ)
“After starting with generic drugs, Mark Cuban is coming for a blockbuster. Starting in July, a biosimilar version of the world’s highest-grossing drug, Humira, will be available on the billionaire’s website for $569.27 in cash plus fees—a 90% discount to the $6,922 that AbbVie, the maker of the branded drug, charges as its list price.”
“In Defense of Made-Up Metrics” (The Diff)
“A common complaint about public companies, especially growth companies, is that they hate talking about net income but love talking about ‘Adjusted EBITDA,’ or even wilder metrics than that like WeWork's ‘Community-Adjusted EBITDA,’ a metric that stripped out not just interest, taxes, depreciation, and amortization (the ‘ITDA’ in EBITDA) but also the cost of marketing, corporate overhead, and the upfront cost of designing and building out new buildings…
When management presents a non-GAAP view of profits, or they point to some new metric that they say matters more than revenue to them, they aren't telling you everything. But they're certainly telling you something.”
“Coinbase CEO Says He’ll Fight the SEC for the Crypto Industry | WSJ” (YouTube)
“Coinbase CEO Brian Armstrong is entering a battle with regulators after the SEC sued his company Tuesday. The SEC alleges Coinbase broke the rules by listing crypto tokens subject to securities laws. He sat down with The Wall Street Journal to discuss the situation, saying he hopes the lawsuit will bring more clarity to the industry.”
Tweets of the Week
Until Thursday,
The Bear Cave