The Bear Cave #180
The Bear Cave #180
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Applied Digital (APLD)” and “Problems at Hershey (HSY)” and our next premium investigation comes out this Thursday, August 3.
New Activist Reports
The Friendly Bear published on B. Riley Financial (NASDAQ: RILY — $1.57 billion), an investment bank and financial services company. The Friendly Bear alleged that B. Riley “is controlling managerial decisions at Applied Digital (NASDAQ: APLD) to the detriment of Applied Digital shareholders” creating “one of the worst governance situations” on the public markets. For example, The Friendly Bear alleged that Applied Digital paid back a B. Riley loan early to help shore up B. Riley’s finances, the majority of Applied Digital’s board is affiliated with B. Riley in violation of NASDAQ listing requirements, and Applied Digital’s CEO used B. Riley funds to purchase stock ahead of positive announcements.
The Friendly Bear concluded that both companies “could face substantial litigation in the coming months due to severe disclosure and governance problems.”
Culper Research published on SoundHound AI (NASDAQ: SOUN — $524 million), an audio and speech recognition company. Culper called the company “a flailing AI wannabe trading at 22x revenues that has misled investors.” Specifically, Culper raised concerns about the company’s purported drive-thru voice recognition technology and noted that its partnership with White Castle has not expanded beyond three test locations after a three-year partnership. In addition, multiple customers have complained the company’s speech recognition technology gets orders wrong, and “it was easier to cancel our order, back up, and go inside.”
Culper Research concluded,
“In March 2023, multiple insiders instead set up stock sale plans, and have collectively sold $11.5 million in stock, most of it since June. We're short and think shares are headed lower.”
Iceberg Research published an update on Eos Energy Enterprises (NASDAQ: EOSE — $287 million), a clean energy storage battery company. Iceberg found that the company’s energy storage system backlog was inflated and “the customer behind 62% of EOS’s backlog had its assets foreclosed and auctioned off in May.”
Viceroy Research published two updates on Hexagon AB (Stockholm: HEXA-B — SEK280 billion), a Swedish engineering and technology group. Viceroy claimed the company’s recent investor communications did not answer its governance issues and instead used “vomit-inducing jargon intended for the sole purpose of pumping its stock.” In addition, Viceroy alleged the company had “several ongoing audits” and above-average auditor turnover at some subsidiaries. Viceroy concluded,
“We believe that Hexagon AB should be 50% below where it is currently trading, before allowing for the risks associated with poor governance.”
A new Twitter account, @ShortBudLight, published multiple Twitter threads on Anheuser-Busch (NYSE: BUD — $102 billion), the owner of Bud Light. The account alleges that the Bud Light boycott appears to be expanding to the company’s other brands and some bars appear to be permanently removing Bud Light kegs.
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of GameStop (NYSE: GME — $6.68 billion) resigned after a little over one year. The company has had four different CEOs and five different CFOs in the last five years.
CEO of NatWest Group PLC (NYSE: NWG — $27.8 billion) “agreed by mutual consent to step down as Group Chief Executive with immediate effect” after about three and a half years. The departure comes amid allegations from British Politician Nigel Farage that his personal bank account was closed because of his political views and further allegations that the NatWest CEO made misleading statements to a journalist about the matter.
CFO of Envista Holdings (NYSE: NVST — $5.68 billion) resigned after four years “to join another company” and will be replaced on an interim basis by the company’s Vice President of Investor Relations. In June, the company’s President of Diagnostics was “terminated by mutual agreement” and in April 2022 the company’s Chief Accounting Officer resigned after two and a half years “to pursue a new professional opportunity.”
Chief Accounting Officer of CenterPoint Energy (NYSE: CNP — $19.0 billion) resigned after one year “to pursue another career opportunity.” The company has had three different CEOs and five different CFOs in the last five years.
Chief Accounting Officer of Sonder Holdings (NASDAQ: SOND — $126 million) resigned after one year “in order to pursue a new professional opportunity.” In the last eighteen months, the company’s General Counsel, CFO, Chief Technology Officer, and Controller have all departed and the company has fallen ~95% since its January 2022 SPAC merger.
Chief Operating Officer of Zevia (NYSE: ZVIA — $192 million) “mutually agreed to step down” after about a year. In the last two years, the company’s CEO, Chief Strategy Officer, prior Chief Operating Officer, and CFO have all departed. The company is down ~80% since its July 2021 IPO.
Chief Human Resources Officer of Dentsply Sirona (NASDAQ: XRAY — $8.72 billion) departed after four years according to her LinkedIn. In April 2022, the company’s CEO was “terminated” and the company’s CFO departed that month as well.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“SEC Charges Investor Joseph C. Lewis and Associates with Insider Trading” (SEC)
“In September 2019, according to the SEC’s complaint, Lewis learned material nonpublic information regarding another portfolio company, which had received positive results in a clinical trial that it would present at a conference the following month. Within days, the SEC alleges, Carter and then later O’Connor and Waugh purchased the company’s common stock. In O’Connor and Waugh’s case, Lewis allegedly gifted this information to them as a substitute for a formal retirement plan and loaned each $500,000 to execute the trades. As alleged, upon the company’s public announcement of the positive clinical trial data in October 2019, its share price increased by 16.7 percent, and Carter, O’Connor, and Waugh together profited more than $373,000.”
“SEC Charges Florida Resident with Operating $35 Million Ponzi Scheme that Targeted Church Members” (SEC)
“The SEC’s complaint alleges that, from approximately June 2019 until September 2022, Seaman told investors he would use their money to invest in technology companies and to trade currencies and commodities. Seaman falsely promised annual returns ranging between 18 and 48 percent and described the investments as ‘safe’ and the returns as ‘guaranteed.’ The complaint further alleges that Seaman solicited investors by touting his proven success investing in currencies when, in reality, he was losing millions of dollars of investors’ money and his currency trading was always unprofitable. Seaman also allegedly misappropriated millions of dollars for himself, in part to purchase luxury automobiles and to pay for trips on private planes.”
“Altice co-founder placed under house arrest in Portugal in corruption probe” (FT)
“The investigation centers on whether Pereira and businessman Hernani Vaz Antunes, who was also placed under house arrest by a judge late on Monday, were involved in a scheme to rig the French group’s local procurement processes in Portugal.”
Tweets of the Week
Until Thursday,
The Bear Cave