The Bear Cave #177
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “The Bear Cave’s Ultimate Guide For Bears” and “Problems at Applied Digital (APLD)” and our next premium investigation comes out Thursday, July 20.
New Activist Reports
Wolfpack Research published on Applied Digital (NASDAQ: APLD — $803 million), a “next generation datacenter” company. Wolfpack Research called the company “an embarrassing and predictable stock promotion” and suggested the company’s largest customer is an AI startup with a history of deception. Wolfpack also noted the company’s numerous ties to B. Riley insiders that control almost half the company.
Guasty Winds also published on Applied Digital and suggested that “an opaque material customer relationship (>40%) has almost no economic interest in at least two of the three subsidiaries that do business with Applied Digital.”
The Bear Cave, which has no affiliation with Wolfpack Research or Guasty Winds, also published on Applied Digital and raised concerns about the company’s frequent business pivots and close ties to B. Riley. The Bear Cave wrote, in part,
“The line between where B. Riley ends and Applied Digital begins appears to be blurred. For example, both B. Riley and Applied Digital appear to share the same office space. On its website, Applied Digital lists ‘3811 Turtle Creek Blvd., Suite 2100, Dallas, TX 75219’ as its corporate address, yet in multiple SEC filings B. Riley also lists that same address and suite as its office space.
Applied CEO Wes Cummins also previously worked as a President at B. Riley from 2002 to 2011 and later sold his investment advisory business, 272 Capital, to B. Riley in 2021. In addition, one of Applied’s independent board members, Virginia Moore, is the wife of Andy Moore, CEO of B. Riley Securities. Another independent Applied board member is Chuck Hastings, the CEO of B. Riley Wealth Management. B. Riley Equity Research also covers Applied Digital stock and last week raised its buy-rating price target to $18, about twice where shares currently trade.”
Night Market Research published on Patriot Battery Metals (ASX: PMT — AUD$1.79 billion), a lithium exploration company. Night Market called the company an “aggressive Vancouver promotion” and noted that the company, currently valued close to $2 billion, “acquired its core asset for $8 million only 16 months ago.”
Gotham City Research published a second report on SES-imagotag (Paris: SESL — EUR2.64 billion), a French electronic retail labeling company. Gotham City said it identified “numerous accounting irregularities” at the company as well as additional undisclosed related party transactions. For example, records from the Austrian land registry “reveal that members of SESL’s management own the property where SES-imagotag’s 2nd largest office operates.”
Two weeks ago, Gotham City first raised concerns about SES-imagotag and its relationship with China-based BOE Technology Group, which is SES-imagotag’s “largest shareholder, largest supplier, one of the largest customers, JV partner, and on the audit committee.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Light & Wonder (NASDAQ: LNW — $5.80 billion) resigned after two years “to pursue another opportunity that will allow her to further advance her long-term professional objectives outside the gaming industry.” The company’s CEO resigned in August 2022, the company’s Chief Accounting Officer departed in November 2021, and the company’s prior CFO resigned after just one and a half years in October 2021.
CFO of Offerpad Solutions (NYSE: OPAD — $320 million) resigned after almost four years. The company is down ~90% since its September 2021 SPAC merger.
CFO of WM Technology (NASDAQ: MAPS — $134 million) “is leaving to pursue another business opportunity” after four and a half years. The company’s Chief Operating Officer and Chief Technology Officer both resigned in December 2022 and the company’s CEO role has been vacant since November 2022.
CFO of InnovAge Holding Corp (NASDAQ: INNV — $906 million) stepped down after six and a half years “to explore new career opportunities.” In March, the company’s Chief Operating Officer and two board members resigned and the company is down ~70% since its March 2021 IPO.
Chief Transformation Officer of SeaWorld Entertainment (NYSE: SEAS — $3.56 billion) “intends to retire from SeaWorld in order to pursue personal opportunities” just six months after transitioning into the job after stepping down as CFO. The company has had four different CFOs and five different CEOs in the last five years.
Three board members resigned from Vinco Ventures (NASDAQ: BBIG — $23 million) “effective immediately.” In July 2022, the Co-CEO of Vinco Ventures was terminated “less than 72 hours after he was appointed” to thwart what the company believes was a secret hostile takeover attempt. The company had also released a press release calling two past 8-K filings “incorrect and based on an invalid Board meeting.” The company now appears to have just two board members.
Chief Human Resources Officer of Embecta Corp (NASDAQ: EMBC — $1.17 billion) “mutually agreed” to depart after a little over one year. The separation agreement includes “cash severance payments in the amount of $720,000 [and] continued vesting of all outstanding and unvested equity awards.” The company is down ~50% since its March 2022 IPO.
Chief Revenue Officer of MicroStrategy (NASDAQ: MSTR — $4.93 billion) resigned after one and a half years “effective immediately.” In April, the company’s Chief Technology Officer retired and the company has had three CFO transitions in the last five years.
Chief Lending Officer of First Hawaiian (NASDAQ: FHB — $2.36 billion) “entered into a separation agreement” after six years and the Chief Risk Officer also “entered into a separation agreement” after about ten years.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Companies That Embraced Social Issues Have Second Thoughts” (WSJ)
“Executives rethink if and when to weigh in on potentially divisive issues, fearing backlash from all sides, and develop crisis plans in case things go wrong…”
“SEC Charges Former Army Financial Counselor Who Defrauded Gold Star Family Members” (SEC)
“As alleged, between May 2018 and November 2022, Craffy used his position and access to manipulate grieving family members by directing them to transfer their benefits into brokerage accounts he managed outside of his official duties with the U.S. Army. Once the funds were deposited, Craffy engaged in unauthorized trading and trading that did not match his customers’ risk profiles and investment objectives and exposed them to higher risks of loss from excessive trading, concentration and lack of diversification. In that 54-month span, Craffy’s customers incurred more than $1.64 million in commissions and fees, most of which Craffy pocketed, while the accounts he managed suffered approximately $1.79 million in realized losses and faced additional unrealized losses of approximately $1.8 million. In one particularly egregious offense, Craffy misappropriated $50,000 from the IRA account of a minor child whose parent had died on active duty.”
“SEC Brings Emergency Action related to Spartan Trading Company, LLC” (SEC)
“Among other things, the complaint also alleges that investor funds were slowly eaten away by the over $1.9 million that Myre and the Dahmens withdrew from Spartan Trading accounts during the life of the fund. According to the SEC's complaint, Spartan Trading began to unravel in late 2022. After a February 2023 meeting to discuss the fund's organization and activities, Myre and the Dahmens were found dead in a pickup truck in Bloomington, Minnesota in what local police reported to be a murder-suicide arising from a business dispute.”
Tweets of the Week
Until next week,
The Bear Cave