The Bear Cave #198

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

Dec 03, 2023

Welcome to The Bear Cave! Our last premium articles were “Problems at Progress Software (PRGS)” and “Problems at Axos Financial (AX)” and our next premium investigation comes out this Thursday, December 7.

New Activist Reports

Grizzly Research published on SenseTime Group (Hong Kong: 0200 — HKD$46.2 billion), a Hong Kong-based AI and facial recognition company. Grizzly Research alleged the company has “artificially inflated revenue” because the company “either directly or through intermediaries provides funds to customers that in turn are used to purchase goods from SenseTime.” Grizzly also alleged the company does business with “several undisclosed related parties controlled by SenseTime executives” and highlighted media reports showing some SenseTime counterparties have been arrested amid corruption probes.

Viceroy Research published an update on Arbor Realty Trust (NYSE: ABR — $2.53 billion), a mortgage REIT focused on bridge financing. Viceroy cited new data that shows Arbor’s loan delinquencies “are skyrocketing” and suggested Arbor’s “entire loan book is distressed.” Last month, Viceroy suggested the company’s equity is worth zero because its “high-risk multifamily residential bridge loans… are going bad fast.”

J Capital Research published on Ispire Technology (NASDAQ: ISPR — $581 million), a Chinese vape manufacturing company. J Capital alleged that the “company is an insider enrichment scheme stuffed with multiple undisclosed related parties, inflated supply, and dubious sales.” For example, the company’s biggest distributor, Your-Buyer, is “owned by an officer of the chairman’s company.” J Capital also highlighted that the company has been persistently unprofitable and has less than one year of cash runway left.

Night Market Research published on Mondee Holdings (NASDAQ: MOND — $252 million), a corporate travel and technology company. Night Market wrote that “high interest debt and preferred equity overwhelm Mondee’s marginally profitable business” and suggested that recent loan amendments indicate lenders have lost patience with the company’s loan covenant breaches. Night Market concluded that there is “a high probability of near-term common equity wipeout with rising default risk.” The company is down ~70% since its July 2022 SPAC merger.

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of PureCycle Technologies (NASDAQ: PCT — $760 million) resigned after two years “to pursue other opportunities.” Last month, Bleecker Street Research raised concerns about the company’s recycling plant capabilities.
CEO of GEO Group (NYSE: GEO — $1.29 billion) “departed on mutually agreeable terms” after two and a half years and is also leaving the board.
CEO of NextNav (NASDAQ: NN — $464 million) resigned, departed the board, and “entered into a Separation, General Release and Post-Separation Consulting Agreement” after eight years. The company is down ~60% since its October 2021 SPAC merger.
Chief Accounting Officer of Edgewell Personal Care (NYSE: EPC— $1.75 billion) resigned “to pursue other opportunities” after eleven months. The predecessor Chief Accounting Officer also resigned in August 2022 after just eight months “to pursue other opportunities.” Before that, the prior Chief Accounting Officer resigned in June 2021 after two and a half years “to pursue other opportunities.”
Chief Platform Officer of Payoneer Global (NASDAQ: PAYO — $1.90 billion) “departed” after a little over one year. In addition, the company’s CEO and CFO departed in March, the company’s Chief Revenue Officer departed in February, and the company’s Chief Accounting Officer resigned in February 2022. The company is down ~50% since its June 2021 SPAC merger. In July 2021, The Bear Cave published on Payoneer and wrote that “Payoneer appears to transact in the high-risk corners of the internet, despite explicit denials about doing so.”
Stephen H. Wise, board member of QuidelOrtho Corporation (NASDAQ: QDEL — $4.63 billion), resigned after one and a half years “due to other professional commitments.” In August, another board member also resigned after a little over one year “due to other professional commitments.”
Chief Revenue Officer of Fastly (NYSE: FSLY — $2.36 billion) resigned after nearly three years “to pursue another opportunity.” The company’s CEO and Chief Legal Officer also both departed last year.
Charlie Munger, who served on the board of Daily Journal Corporation (NASDAQ: DJCO — $456 million) for nearly 47 years, the board of Berkshire Hathaway (NYSE: BRK.A — $778 billion) for 46 years, and the board of Costco (NASDAQ: COST — $264 billion) for 27 years, “peacefully died at a California hospital” at the age of 99. Warren Buffett, CEO of Berkshire Hathaway, added: “Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom and participation.”

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

Hedge Fund Analyst Christmas List

The Bear Cave is working on our annual “Hedge Fund Analyst Christmas List” of the best free and paid resources for professional investors. In particular, we are looking to highlight off-the-beaten-path niche resources that provide overwhelming value.

If you know of one, please hit reply and let us know! And in case you missed it, check out our list from last year.

What to Read

“Charlie Munger, Warren Buffett’s Partner and ‘Abominable No-Man,’ Dies at 99” (WSJ)

“Munger also confronted tragedy: In 1955, his son Teddy died of leukemia at age 9. Munger later recalled pacing the streets of Pasadena in tears at ‘losing a child inch by inch.’ More than six decades later he would still choke up at the memory of his son’s suffering.”

“Charlie Munger’s Life Was About Way More Than Money” (WSJ)

“Munger—who graduated magna cum laude from Harvard Law School without ever earning a college degree—knew perfectly well how smart he was. And it is an understatement to say he didn’t suffer fools gladly. In an interview with the WSJ in 2019, he used the phrase ‘massively stupid’ at least seven times to describe other people and even entire professions.”

“Behind Credit Suisse’s Fall: A Chairman’s Lasting Mark on the Culture” (WSJ)

“The Swiss lawyer cut an urbane figure around Zurich. He didn’t have a background in banking. But he impressed an earlier chairman as Credit Suisse’s top lawyer and chief operating officer in charge of compliance. Rohner’s tactic was to dispute or delay payouts in probes and lawsuits, boosting short-term profit.”

“Jeff Ubben Shuts Socially Responsible Firm After Three Years” (Bloomberg)

“Ubben, 62, founded Inclusive Capital in 2020 after running the activist hedge fund ValueAct Capital for two decades. He said at the time that Inclusive Capital will back companies focused on tackling problems ranging from environmental damage to food scarcity, and he intended to raise $8 billion for his new firm.”