The Bear Cave #193
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Even More Problems at Rumble (RUM)” and “Problems at LifeStance Health (LFST)” and our next premium investigation comes out this Thursday, November 2.
New Activist Reports
Keith Dalrymple at DF Research published a 79-page report on Brookfield Infrastructure Partners (NYSE: BIP — $9.81 billion), a publicly traded infrastructure investment partnership. DF Research alleged that “aggressive accounting, overpayment of distributions, asset value inflation, and an unjustifiably high multiple create substantial downside risks” for the stock. For example, DF Research noted that a key investment in utility infrastructure provider BUUK Infrastructure is carried at a $1.2 billion value by Brookfield, when in reality the equity may be worthless because the company produces minimal free cash flow. DF Research concluded that Brookfield Infrastructure Partners has “over ~70% downside to fair value.”
Muddy Waters published for a second time on Sunrun Inc (NASDAQ: RUN — $1.92 billion), a California-based residential solar company. Muddy Waters said it “[wasn’t] cynical enough when we first published our initial short thesis on Sunrun in July 2022” and alleged the company “greatly exaggerated its (non-GAAP) subscriber numbers for years.” As a result of inflating its solar subscriber numbers, Muddy Waters said the company claims government credits for systems it hasn’t yet installed, potentially contributing to excess credit income of ~$200 million for 2022.
Capybara Research published an update on FingerMotion (NASDAQ: FNGR — $297 million), a Singapore-based phone data company with numerous oddities. For example, the company appears to use its copyright registration numbers as "Patent Registration Numbers" in its SEC filings, and the company is audited by Mr. Kam Fuk Chan, who was reprimanded and fined in 2019 and 2022 and had his license revoked earlier this year. Earlier this month, Capybara called the company “one of the biggest stock promotions we have ever seen.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO of MarketWise Inc (NASDAQ: MKTW — $625 million) stepped down after just eight months and was replaced by the company’s founder, Porter Stansberry. The company has had four different CEOs and four different CFOs in the last two years and two board members resigned last week as well. The company is down ~80% since its July 2021 SPAC merger.
CFO of Disc Medicine Inc (NASDAQ: IRON — $994 million) “plans to depart from her position effective upon the company identifying her successor” after a little over two years in the role. The company is down ~65% since its February 2021 IPO.
CFO of Parke Bancorp (NASDAQ: PKBK — $187 million) resigned after three years “in order to pursue other employment opportunities.” The company also disclosed “a suspected $9.5 million theft by one of the cash couriers utilized by our bank.” In May 2022, the bank’s audit committee dismissed RSM LLP as auditor and instead “engaged S.R. Snodgrass, P.C.”
Thomas R. Nides, Vice Chairman of Wells Fargo (NYSE: WFC — $141 billion), departed after just one month “to return his attention to events in the Middle East.” Mr. Nides is the former U.S. Ambassador to Israel.
Janie Wade, board member of R1 RCM (NASDAQ: RCM — $4.69 billion), resigned after just ten months “in connection with her resignation from Intermountain Health,” where she had served as CFO. Intermountain Health was both a major customer and major shareholder of R1 RCM. Last week, Jehoshaphat Research published on R1 RCM and alleged that the company’s “financial accounting is so misrepresentative, its corporate governance so surprisingly bad, and the reflexivity of its business model so misunderstood that its stock is practically uninvestible today.” The company is down ~25% in the last month.
Chief Accounting Officer of Granite Ridge Resources (NYSE: GRNT — $841 million) resigned after one year “to pursue another employment opportunity.” The company is down ~40% since its October 2022 SPAC merger.
Adam Gray, board member of Blue Bird Corp (NASDAQ: BLBD — $599 million) for the last two years and managing partner of Coliseum Capital, “decided to step down from the board following Coliseum’s sale of its Blue Bird holdings through a secondary offering.” In June, the company’s audit committee chair resigned and in May another board member resigned “effective immediately” after almost three years. The company’s CEO also resigned in May “for personal reasons” after one and a half years and the company’s General Counsel resigned in March 2022. The company has had three CEO transitions and four CFO transitions since its February 2015 SPAC merger.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Fired Planet Fitness CEO kept kegs tapped and thousands in personal cash on hand” (Insider)
“Insider spoke with six former Planet Fitness employees. Some former staffers pointed to drinking in the office and Rondeau asking company staff to withdraw thousands from Rondeau's personal accounts to pay for cash-fueled weekend getaways — even after a lawsuit claimed Planet Fitness suffered from a ‘debaucherous’ alcohol-fueled environment — as red flags.”
“Abercrombie Sued Over Former CEO’s Alleged Sexual Abuse of Male Models” (WSJ)
“The CEO allegedly used promises of a job at Abercrombie to lure young men to locations around the world and coerced them to have sex with him and others, according to a lawsuit filed Friday in Manhattan federal court.”
“Red Flag Alert – Caffeine Jitters” (Herb Greenberg)
“But just remember: Anytime a company has to resort to alternative financing, investors should be on guard. I have no doubt this stock will have a life of its own, especially if and as short-sellers cover their position.”
Tweets of the Week
Until Thursday,
The Bear Cave