The Bear Cave #189
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Oddity Tech (ODD)” and “Problems at Coca-Cola (KO)” and our next premium investigation comes out this Thursday, October 5.
New Activist Reports
GlassHouse Research published on Granite Construction (NYSE: GVA — $1.67 billion), a construction contractor and quarry company. GlassHouse called Granite Construction a “blueprint for disaster” based on “dubious accounting coupled with a rocky history.” GlassHouse alleged, in part,
“In an industry abundant with underbidding, delays, cost-overruns and suspect dealings, we believe that Granite is one of the worst offenders. While the company settled with the SEC for $12 million in August 2022 related to accounting malfeasance, we believe current issues are even worse.”
Specifically, GlassHouse alleged the company was behind on its construction projects, prematurely recognized project revenue, and is bidding on lower-quality projects to make up for the company’s poor performance.
Viceroy Research published an update on Medical Properties Trust (NYSE: MPW — $3.26 billion), a Birmingham-based REIT that owns hospitals typically in long-term sale-leaseback transactions. Viceroy alleged that Infracore, a Medical Properties Trust unconsolidated joint venture, “has round tripped substantially all revenues [for] tenant and related party, Swiss Medical Network.” In essence, Viceroy alleged that the Medical Properties Trust hospital tenant is in distress and can only make rent payments after receiving loans and “cash pooling arrangements” from the Medical Properties Trust joint venture.
Viceroy and other activists have previously published extensively on problems at Medical Properties Trust.
Culper Research published on GigaCloud Technology (NASDAQ: GCT — $361 million), a Hong Kong-based payments and logistics provider for e-commerce companies. Culper wrote, in part,
“GCT has two main warehouse clusters on the east coast (NJ) and west coast (CA). Over the past two weeks, we staked out these warehouses and saw activity levels which in our view portrayed a far smaller business than GCT claims.”
Culper also interviewed a former GCT executive who estimated the company “was delivering just 900 packages monthly” in contrast to the company’s claimed $63 million in 2022 last-mile delivery revenue.
Bleecker Street Research published on Upstart Holdings (NASDAQ: UPST — $2.39 billion), an “AI-powered” consumer lending platform. Bleecker Street Research said that “Upstart’s two largest sources of revenue come from banks with pretty big regulatory issues.” For example, Cross River Bank, which accounted for ~45% of Upstart’s revenue, received a cease-and-desist notice from the FDIC regarding its supervision of loans. In addition, FinWise, which accounted for ~28% of Upstart’s revenue, was criticized by the National Consumer Law Center in a letter to the FDIC for “abusive and predatory” lending practices.
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Shoe Carnival (NASDAQ: SCVL — $657 million) “mutually agreed to leave the company to pursue other opportunities” after five months. The company said one factor for the departure was that the CFO would need to “spend substantially more time working from the company's Evansville, Indiana headquarters.”
CFO of TrueCar (NASDAQ: TRUE — $186 million) was “terminated without cause” after seven months. The company has had six different CFOs in the last five years.
CFO of Instructure Holdings (NYSE: INST — $3.66 billion) “separated” after three and a half years. The company’s Chief Revenue Officer also resigned in February and the company is up about 25% since its July 2021 IPO.
CFO of JFrog Ltd (NASDAQ: FROG — $2.63 billion) resigned after six years “to pursue another opportunity.” The company is audited by Kost Forer Gabbay & Kasierer and is down ~60% since its September 2020 IPO.
CEO of Duckhorn Portfolio (NYSE: NAPA — $1.18 billion) “retired” after nearly thirteen years and is also departing the board, which “has established an ad hoc committee to lead a comprehensive search process to identify a permanent CEO.” The company’s longtime CFO also resigned in June and the company is down ~45% since its March 2021 IPO.
Chief Accounting Officer of Advance Auto Parts (NYSE: AAP — $3.33 billion) resigned after a little under two years “to pursue another opportunity.” The company’s CFO also “was separated from the company” in August.
Chief Human Resources Officer of WSFS Financial (NASDAQ: WSFS — $2.23 billion) departed after three years and was hired by a specialty insurance firm. In August, the company’s CFO was also “terminated without cause” after seven years.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“SEC Charges Hydrogen Vehicle Co. Hyzon Motors and Two Former Executives for Misleading Investors” (SEC)
“Hyzon misrepresented the status of its business dealings with potential customers and suppliers to create the false appearance that significant sales transactions were imminent. The complaint alleges that Hyzon also falsely stated that it had delivered its first FCEV in July 2021, even going as far as posting a misleading video of the vehicle purportedly running on hydrogen, when the vehicle was not equipped to operate on hydrogen power. The complaint further alleges that Hyzon later falsely reported that it sold 87 FCEVs in 2021, when in fact it had not sold any vehicles that year.”
“SEC Charges Three Southern California Siblings with Insider Trading” (SEC)
“The SEC’s complaint alleges that Marco Perez, formerly a General Finance accounting manager, learned in late February 2021 of United Rentals’ interest in acquiring General Finance. As alleged, Marco Perez then began purchasing General Finance shares and continued to do so as he learned about progress on the acquisition. According to the complaint, Marco Perez tipped Pedro Perez and Durbin and encouraged them to buy General Finance shares…”
“Former CEO And Former CFO Of Telecommunications Company Charged In Connection With Massive Accounting Fraud Scheme” (DOJ)
“The defendants, and other senior executives at the company, engaged in a scheme to improperly and misleadingly recognize revenue at Pareteum, which owned and managed a mobile device network platform. The defendants and their co-conspirators made the revenue appear to have been earned in its records based on aspirational, non-binding purchase orders that did not impose any obligation on customers to pay Pareteum…”
Tweets of the Week
Until Thursday,
The Bear Cave