The Bear Cave #182

New Activist Reports, Recent Resignations, and Tweets of the Week

Aug 13, 2023

Welcome to The Bear Cave! Our last premium articles were “Problems at Hershey (HSY)” and “Problems at XP Inc (XP)” and our next premium investigation comes out this Thursday, August 17.

New Activist Reports

Spruce Point Capital published on Xylem (NYSE: XYL — $24.6 billion), a water utility technology provider. Spruce Point raised concerns about the company’s recent acquisition of Evoqua Water and said the deal would be dilutive and that Evoqua was previously charged for revenue fraud among other accounting issues. Spruce Point also claimed the acquisition overstated synergies and wrote, in part,

“The resignation of Xylem’s Audit Chair in mid 2022 before the deal, and replacement by Victoria Harker who was CFO of WorldCom / MCI Group during a period of one of the world’s biggest accounting frauds and restatements in history, should put investors on red alert.”

Viceroy Research published an update on Hexagon AB (Stockholm: HEXA-B — SEK277 billion), a Swedish engineering and technology group. Viceroy claimed the company engaged in revisionist history by masking “that a Hexagon insider-controlled slush fund front ran / double dipped [Hexagon’s] investments.”

Hindenburg Research published a list of public questions for Tingo Group (NASDAQ: TIO — $201 million), a New Jersey conglomerate that claims to have phone services, food processing, and e-commerce businesses overseas. Hindenburg questioned the location and existence of the company’s claimed $780 million cash balance, raised concerns about the lack of interest accrued on the company’s purported cash, and alleged the company’s CEO lied about his educational credentials, among other concerns.

In June, Hindenburg called the company “an exceptionally obvious scam with completely fabricated financials.”

Recent Resignations

Notable executive departures disclosed in the past week include:

CEO of Wolverine World Wide (NYSE: WWW — $700 million) was “terminated without cause” after one and a half years and also departed the board.
CEO of Mirati Therapeutics (NASDAQ: MRTX — $2.26 billion) resigned from the company and board and entered into a “separation agreement” after almost two years. The company has also had four different CFOs in the last five years.
CFO of Steel Partners Holdings LP (NYSE: SPLP — $975 million) resigned after a little over two years to “pursue other opportunities.”
CFO of NuScale Power (NYSE: SMR — $1.64 billion) “separated from the company” after two and a half years. The company’s Chief Nuclear Officer also departed in January after nine years and the company is down ~30% since its May 2022 SPAC merger.
CFO of Beauty Health Co (NASDAQ: SKIN — $927 million) departed after three years and is “entitled to severance benefits as an involuntary separation without cause.” In February 2023, The Bear Cave published on the company and wrote that “lackluster leadership, high executive turnover, internal accounting issues, and a dubious customer base add to the pressure on the company.” The company is down ~30% since its May 2021 SPAC merger.
CEO of Dutch Bros (NYSE: BROS — $5.46 billion) will step down in January 2024 after a little over three years. The company is down ~25% since its September 2021 IPO.
CFO and “Master of Coin” of Tesla (NASDAQ: TSLA — $760 billion) “stepped down” after four years. The company has had four CFO transitions in the last ten years.
CEO of FREYR Battery (NYSE: FREY — $1.06 billion) was “terminated” after five years. Five board members have also departed in the last year and the company’s prior CFO resigned by mutual agreement in April 2022 after one and a half years. The company is down ~25% since its July 2021 SPAC merger.
CEO of European Wax Center (NASDAQ: EWCZ — $1.09 billion) departed after five years. The company has also had three different CFOs in the last two years and is down ~25% since its August 2021 IPO.
Chief Legal Officer of Six Flags Entertainment (NYSE: SIX — $1.86 billion) departed after a little over one year. The company has had three different CEOs and five different CFOs in the last five years and in December 2022 The Bear Cave published on the company and said that “Six Flags is a struggling business with strong competition, out-of-touch management, looming debt maturities, and a future that may be heading off the tracks.”
Chief Accounting Officer of PowerSchool Holdings (NYSE: PWSC — $4.18 billion) resigned after two and a half years “to pursue other opportunities.” The company’s Chief Revenue Officer, Chief Operating Officer, and Chief Marketing Officer have also all resigned in the last twelve months.

Data for this section is provided by VerityData from VerityPlatform.com

What to Read

“He Thought He Saw Wrongdoing on Wall Street. It Took Over His Life.” (WSJ)

“But most whistleblowers don’t become rich or famous. Many destroy their relationships, lose their jobs, turn disillusioned when their big revelations are greeted with ambivalence. Since the SEC launched its whistleblower program more than a decade ago, the agency has received more than 64,000 tips. By late 2022, 328 of those whistleblowers had received financial awards.”

“Short-seller Hindenburg probably reaped just tiny gains off $232 billion carnage” (Bloomberg)

“The surprise is that Mr. Anderson, 39, who runs tiny Hindenburg Research with a team of about a dozen researchers, likely reaped quite small profits from those fights.”

“Is David Solomon Too Big a Jerk to Run Goldman Sachs? Inside a banking mutiny.” (Intelligencer)

“Goldman veterans say that in some ways, the situation is more toxic than what the bank faced in the post-financial-crisis vampire-squid days. ‘This is considerably uglier for Solomon,’ says a former insider. ‘It’s worse because it’s much more personal, and it’s all directed at him.’”