The Bear Cave #183
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium article was “Even More Problems at Roblox (RBLX)” and our next premium investigation comes out Thursday, September 7. The Bear Cave also previously published two articles on Roblox in February 2022 titled “Problems at Roblox (RBLX)” and “More Problems at Roblox (RBLX).”
New Activist Reports
Hindenburg Research published on Freedom Holding Corp (NASDAQ: FRHC — $5.22 billion), a Kazakhstan-based company that operates retail stock brokerages, banks, and margin lending services in Russia and Eastern Europe. Hindenburg said it found “a laundry list of red flags” and alleged the company “brazenly skirts sanctions, shows hallmark signs of fake revenue, [and] commingles customer funds and gambles assets in levered, illiquid bets.” Hindenburg also alleged that Freedom Holding’s publicly traded stock was being manipulated because two small affiliated brokerage firms, Lek Securities and Vision Financial Markets, accounted for nearly 60% of the trading in FRHC stock, despite accounting for only about 0.10% of overall NASDAQ trading.
Grizzly Research published on Archer Aviation (NYSE: ACHR — $1.58 billion), an electric flying taxi company. Grizzly Research alleged the company misrepresented a recent Department of Defense contract that in reality is “a noncompetitive award with indefinite quantity and indefinite delivery.” In addition, Grizzly Research alleged the company was securing partnerships with companies like Boeing and United by offering excessive non-economic equity grants and alleged the company was “recycling heavily edited videos of their earlier test flights to portray longer flight performance, more frequent testing, and a generally more advanced product than reality.”
For example, Grizzly Research published identical-looking frames from different promotional videos in October 2022 and July 2023.
Archer stock is up over 200% this year but still remains down ~40% since its September 2021 SPAC merger.
“The Undefined Mystic,” an anonymous Twitter account, published on Eve Air Mobility (NYSE: EVEX — $2.06 billion), a Brazilian electric flying vehicle company that was spun off from Embraer. Undefined Mystic called Eve Air “the most absurdly overvalued equity in all the world markets” and highlighted numerous red flags including that the company has “practically zero IP” and has been “fumbling to create a prototype” after seven years of operation. Undefined Mystic also noted the company’s CEO has recently resigned along with two board member departures.
Guasty Winds published on Aurora Acquisition Corp (NASDAQ: AURC — $215 million), a SPAC that is anticipated to merge with Better Mortgage next week. Guasty Winds called the company “an uneconomic dumpster fire headed for bankruptcy” and said “its financials make WeWork look like Microsoft… the company has cut 91% of its workforce and loan activity has fallen from its peak by ~97%.” Guasty Winds also noted that following the SPAC closing, “~36% of outstanding stock will not be subject to lock-up restrictions and will be freely tradeable” which could lead to a rapid stock collapse from the current price of ~$24 to fair value that Guasty Winds estimates at 81 cents.
Safkhet Capital published a Twitter thread and a public six-page letter on Ebix (NASDAQ: EBIX — $430 million), a conglomerate focused on payments, travel, and IT. Safkhet called its letter a public service announcement and shared details of correspondence to the PCAOB regarding high audit turnover and problematic audits at Ebix. Safkhet concluded, in part,
“The common-sense conclusion from this information, in our view, is that Ebix’s financials—and the financials of all its subsidiaries—cannot be relied upon.”
In June 2022, Hindenburg Research also published on Ebix and called the company a house of cards with “a glaring fake revenue problem.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO of TrueBlue (NYSE: TBI — $471 million) resigned a little over a year into his second stint as CEO and also departed the board. The prior CEO had resigned in June 2022 following “an investigation, led by outside counsel, into allegations regarding his conduct.”
CFO of Zevia (NYSE: ZVIA — $177 million) resigned after a little over a year “to pursue another opportunity.” In the last two years the company’s CEO, Chief Strategy Officer, last two Chief Operating Officers, and CFO have all departed. The company is down ~80% since its July 2021 IPO.
CFO of Arcutis Biotherapeutics (NASDAQ: ARQT — $482 million) resigned after two and a half years to “pursue an external opportunity.” The company’s Chief Commercial Officer also departed in June “to attend to personal matters” and the company is down ~65% since its January 2020 IPO.
Chief Accounting Officer of Agilon Health (NYSE: AGL — $7.20 billion) resigned “to pursue another professional opportunity” after eleven months. In the last twelve months, five board members have resigned. In addition, in May 2022 the company’s prior Chief Accounting Officer resigned after three and a half years “to pursue another career opportunity” and in February 2022 the company’s Chief Innovation Officer and Chief Business Officer both resigned after a little over one year “to pursue another career opportunity.” Last December, Citron Research published on Agilon Health and highlighted headwinds from a recent Supreme Court decision on Medicare overpayments. The company is down ~40% since its April 2021 IPO.
President of Energy at Nikola (NASDAQ: NKLA — $1.53 billion) resigned after one year “to pursue other opportunities.” Earlier this month, the company’s CEO “decided to step down due to a family health matter” after nine months. In March, the company’s CFO “retired” after five years and in December 2022 the company’s Vice President of Sales departed.
Takeshi Minakata resigned from the board of Thorne HealthTech (NASDAQ: THRN — $430 million) after one and a half years. The company has had four different CFOs in the last two years and is down ~20% since its September 2021 IPO.
Chief Medical and Operating Officer of Alignment Healthcare (NASDAQ: ALHC — $1.15 billion) “reached a mutual agreement of employment separation” after almost five years. In July, the company’s General Counsel announced his planned retirement and in April 2022 the company’s Chief Business Officer “entered into a separation agreement” after about a year. The company is down ~65% since its March 2021 IPO.
Data for this section is provided by VerityData from VerityPlatform.com
Upcoming Interview with Marc Cohodes on Tuesday
Prolific short-seller Marc Cohodes and The Bear Cave’s author, Edwin Dorsey, will be having a public Twitter Spaces discussion at 3pm ET on Tuesday with public Q&A. You can join the conversation here.
In addition, later today Marc will be sharing written remarks on Sunday’s Idea Brunch, our sister publication that regularly publishes interviews with great off-the-beaten-path investors. Join nearly 10,000 investors who receive Idea Brunch interviews in their inbox, and you can also read the archives here.
What to Read
“Cracks Deepen for America’s Biggest Hospital Landlord: Struggling Tenants, a Bailout on Hold” (WSJ)
“MPT played a crucial role in private-equity firms’ push into healthcare facilities. It used cheap, plentiful financing to buy more than 400 hospitals, in some cases enriching private-equity firms that sold to MPT at high prices and paid themselves large dividends. Now some of the deals have soured. Hospital chains that are MPT’s tenants have closed facilities and cut services, reducing healthcare options in some communities.”
“Meet The Billionaire Who Built A Fortune ‘Price-Gouging’ Customers Like The Pentagon” (Forbes)
“To critics, TransDigm is a symbol of corporate greed. Its playbook: buy companies that are the only ones that make particular aircraft parts and jack up prices for customers who don’t have alternatives. Reviews by the Pentagon’s inspector general in 2019 and 2021 found that immediately after acquiring a company, TransDigm raised prices on 44 of 46 items, and reaped profit margins as high as 4,436% over the 15% that investigators deemed reasonable. It was all legal. Still, a former employee described TransDigm as a ‘cancer.’ Another told Forbes that the company is the ‘Satan of aircraft parts.’”
“Carl Icahn Should Be Sailing Into the Sunset. Instead, He’s Scrambling to Save His Empire.” (WSJ)
“When IEP shares opened down more than 30% the morning of its earnings release, Bill Ackman, another billionaire investor and frequent Icahn foe, tweeted, ‘On Wall Street, if you want a friend, buy a [dog emoji].’ One of Icahn’s oft-repeated quips, it appeared to be a callback to an earlier Ackman tweet that said Icahn has made many enemies during his career and doesn’t seem to have any real friends.
In response to his younger rival’s comment at the time, the martini-drinking Icahn told The Wall Street Journal, ‘At least most of my friends are dead. What’s his excuse?’”
Tweets of the Week
Until next week,
The Bear Cave