The Bear Cave #178
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 this Thursday, July 20.
New Activist Reports
Spruce Point Capital published on Hims & Hers Health (NYSE: HIMS — $1.91 billion), a telehealth platform “focused on providing modern personalized health and wellness experiences to consumers.” Spruce Point called the company “a celebrity-filled stock promotion in men's health” and raised concerns about whether the company can maintain its growth amid “enormous competition.” In addition, Spruce Point said that the elimination of prescription requirements for some of the company’s top-selling drugs will pose an additional headwind for the company.
Bird Dog Research, a new activist, published on SurgePays (NASDAQ: SURG — $75 million), a wireless communications and payment services company focused on low-income consumers. Bird Dog alleged the company was “abusing the Affordable Connectivity Program” of the FCC, which provides broadband service reimbursements for some U.S. households. Specifically, Bird Dog alleged the company was engaged in misleading marketing to consumers about the program and would use commissioned agents that offered “free tablets” billed to the U.S. government in violation of FCC rules. Bird Dog added that the company’s CEO, Kevin Brian Cox, “has a history of allegations involving abuse of FCC programs” including a 2014 indictment for “wire fraud, false claims, and money laundering for a scheme to defraud the FCC Lifeline program of $32 million.”
Guasty Winds published a follow-up article on Applied Digital (NASDAQ: APLD — $717 million), a “next generation datacenter” company. Guasty Winds outlined the bizarre corporate history of the company, which at one point bought a potato processing business from Applied Digital’s current CEO. Although the company claims the acquisition was successful, Guasty Winds alleged the business “was actually loss-making [and] had a negative working capital position with no significant fixed assets” and fits a broader pattern of deception by the company.
Bleecker Street Research published an update on 374Water Inc (NASDAQ: SCWO — $250 million), a wastewater management and purification company. Bleecker Street highlighted that the company’s core customer is delaying implementation of the company’s water purification units and the company’s new “strategic partner” in Australia is actually a penny stock with de minimis financial resources.
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO of Funko (NASDAQ: FNKO — $413 million) “will take a leave of absence and cease serving as Funko's CEO” after just seven months into his second stint leading the company. Funko has had three CEO transitions and two CFO transitions in the last three years.
CFO of BlueLinx Holdings (NYSE: BXC — $866 million) resigned after three years “to pursue other opportunities.” Earlier this month, the company’s Chief Accounting Officer resigned after one and a half years “to pursue other opportunities” and in June the company’s Chief People Officer also resigned after a little over one year. In March, the company’s CEO departed and left the board after being “terminated without cause” after almost two years.
CFO of Ichor Holdings (NASDAQ: ICHR — $1.05 billion) “retired” after four years. In August 2022, the company’s Chief Operating Officer resigned just five months after joining the company “in order to pursue a new opportunity” and the company has had four different CFOs since its December 2016 IPO.
CFO of Leslie's Inc (NASDAQ: LESL — $1.23 billion) “stepped down” after eight years. Two board members also resigned in March and the company is down ~70% since its October 2020 IPO.
Jean A. Bua, board member and audit chair of Plug Power (NASDAQ: PLUG — $7.29 billion), resigned after a little over one year “effective immediately” and “solely for personal reasons.” Another board member, Jonathan M. Silver, also resigned this month “effective immediately” and “solely for personal and business reasons.” The company added that Mr. Silver “has not advised the company of a disagreement with the company on any matter relating to the company's operations, policies or practices.” In June, another board member decided to not stand for reelection and in July 2022 a fourth board member resigned after just one and a half years “due to her professional commitments.”
General Counsel of United Homes Group (NASDAQ: UHG — $537 million) departed after one and a half years. The company is up about 10% since its March 2023 SPAC merger.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Publishers and Advertisers Push Back at FTC’s ‘Click-to-Cancel’ Proposal” (WSJ)
“Trade groups representing publishers, advertisers and videogame companies have come out against the Federal Trade Commission’s proposed requirement that companies offer consumers an easy click-to-cancel way to get out of subscriptions and memberships.
The FTC earlier this year proposed a rule that would require companies to make it as easy for customers to stop recurring charges as it is to sign up to them. That would mean an end to onerous ‘click to subscribe, call to cancel’ routines and other systems designed to introduce friction into the cancellation process.”
“Carl Icahn Gets Breathing Room From Lenders Following Short-Seller Attack” (WSJ)
“Icahn and the banks finalized amended loan agreements that untie his personal loans from the trading price of his company’s shares—a key risk raised by the short-seller—increase his collateral and set up a plan to fully repay the loans in three years, the company said Monday, confirming an earlier report by The Wall Street Journal. The only thing that could now trigger a so-called margin call is movement in the net asset value of his company’s investments, which include companies and stocks.
That should take pressure off the share price by easing fears of forced sales of the stock to meet margin calls.”
“Short Seller Andrew Left Is Living in Fear of the Feds” (Bloomberg)
“The probe began ramping up a few years ago as the House Financial Services Committee was embarking on a series of hearings into what the panel’s chairwoman, California Democrat Maxine Waters, called ‘predatory short selling.’
In rare moments of bipartisan agreement, lawmakers across the spectrum expressed concern that short sellers were hurting everyday investors while reaping billions of dollars for themselves. Critics cited academic studies questioning whether market manipulation, rather than the strength of bearish research, better explained violent drops in stocks. Some embattled executives said bearish traders were teaming up to topple viable-yet-vulnerable companies.”
Tweets of the Week
Until Thursday,
The Bear Cave