The Bear Cave #204
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Flywire (FLYW)” and “Problems at Chegg (CHGG)” and our next premium investigation comes out this Thursday, January 18.
New Activist Reports
Gotham City Research published on Grifols (NASDAQ: GRFS — $5.96 billion), a Spanish pharmaceutical company. Gotham City alleged that Grifols “manipulates reported debt & EBITDA to artificially reduce reported leverage to 6x which we believe is closer to 10x-13x.” Specifically, Gotham City alleged that Grifols “fully consolidates BPC Plasma [and] Haema onto its financial statements” while at the same time a Grifols family vehicle, Scranton Enterprises, also consolidates those same entities onto its financial statements. Gotham City also found additional “undisclosed related party transactions” including loans and concluded, in part,
“Should our estimate of the Grifols’ true leverage be correct, Grifols will face notably higher financing costs. Consequently, we believe shares are uninvestable, likely zero.”
Grifols stock fell ~36% this week following the report.
Fuzzy Panda Research published on DocGo (NASDAQ: DCGO — $334 million), a healthcare tech and ambulance company. Fuzzy Panda alleged a series of ethical lapses at the company such as Medicare fraud, billing fraud, forging documents, and firing whistleblowers. Fuzzy Panda also highlighted that the company is under multiple government investigations, including by the New York Attorney General, and the company appears to have exaggerated its AI technology given its “AI subsidiary” is based in Estonia and has only one full-time employee.
The company is down ~70% since its November 2021 SPAC merger and the company said it “intends to issue a cease-and-desist letter to [Fuzzy Panda] and is exploring all available legal means to respond.”
Bristlemoon Capital published on National Vision Holdings (NASDAQ: EYE — $1.62 billion), an eye care and glasses retailer. Bristlemoon highlighted that the company recently lost a large contract with Walmart that expires in February 2024, faces weakening demand from its low-income customer base, and will be hurt by an optometrist shortage and rising labor rates.
Viceroy Research published a letter to Ernst & Young outlining concerns about its audit of Arbor Realty Trust (NYSE: ABR — $2.77 billion), a mortgage REIT focused on bridge financing. Viceroy raised concerns that Arbor “has made minuscule provisions for what we believe is an obvious wave of delinquencies which will significantly impair its book.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Skillz (NYSE: SKLZ — $107 million) resigned in his second stint as CFO “due to personal reasons” after nine months. The company’s Head of Accounting also resigned in September after five months and the company has had five different CFOs in the last three years. The company is down ~97% since its December 2020 SPAC merger.
CFO of Navitas Semiconductor (NASDAQ: NVTS — $1.17 billion) resigned “to pursue other opportunities” after nearly two years. The company is down ~35% since its October 2021 SPAC merger.
CEO and CFO of VinFast Auto (NASDAQ: VFS — $15.3 billion) both departed their roles after nearly two years. The company is down ~35% since its August 2023 SPAC merger.
CEO of International Flavors & Fragrances (NYSE: IFF — $20.5 billion) “will cease to serve as CEO and a director of the Board” after two years. In 2023, the company disclosed seven director departures and in the last ten years, the company has had three different CEOs, six different CFOs, and four different Board Chairs.
CFO of Polestar Automotive (NASDAQ: PSNY — $3.55 billion) resigned after two and a half years. The company is down ~85% since its June 2022 SPAC merger.
CFO of Dutch Bros (NYSE: BROS — $4.93 billion) departed after four years. The company’s CEO also departed last month after three years and the company is down ~35% since its September 2021 IPO.
CEO of JetBlue Airways (NASDAQ: JBLU — $1.63 billion) “retired” after nine years and will also be departing the board. The airline is currently in the heavily litigated process of trying to acquire Spirit Airlines.
Jeff Lawson, CEO and Chairman of Twilio Inc (NYSE: TWLO — $13.3 billion), resigned from both roles after nearly sixteen years running the company he co-founded.
Chief Accounting Officer of Booz Allen Hamilton (NYSE: BAH — $16.8 billion) resigned after two years “to pursue another opportunity.”
Former Vice President Al Gore, board member of Apple (NASDAQ: AAPL — $2.89 trillion), “will be retiring” after nearly 21 years. Apple has “adopted a policy that directors generally may not stand for reelection after attaining age 75” and currently has nine board members with an average age of 68.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“How B Riley Garnered the Biggest Short Interest of 2023” (Institutional Investor)
“Meanwhile, Cohodes and short seller James Gibson, founder of hedge fund Castalian Partners, have recently sent several letters to B. Riley’s auditor Marcum as well as to Deloitte, the auditor for the Franchise Group.
According to one letter, which is addressed to James LaRocca, B. Riley’s auditor at Marcum, ‘B. Riley has accumulated large financial exposure on its balance sheet to the Kahn Enterprise via hundreds of millions of dollars in purported equity investments, business and personal loans, and other agreements with companies and entities controlled or beneficially owned by the Kahn Enterprise.’”
“Top Bank Regulator Takes on ‘Drive Fast, Crash’ Risk Culture” (WSJ)
“The national banking system is sound. I can say that fairly confidently, in part because, following those failures from earlier this year, banks and supervisors really focused on those risk areas to make sure that there are proper controls. There’s enough resilience, financial resources, et cetera, so that we can ensure that we’ve got a sound system for everyone.”
“Statement Dissenting from Approval of Proposed Rule Changes to List and Trade Spot Bitcoin Exchange-Traded Products” (SEC)
“I am deeply concerned about today’s actions. I am concerned that these products will flood the markets and land squarely in the retirement accounts of U.S. households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets and will impact the ETPs. I am concerned that today’s actions will create the imprimatur of Commission approval and oversight of the underlying spot markets when really no such oversight exists… I fear that today we are setting ourselves up for tomorrow’s failure, and it will be the investors that we have a duty to protect who will ultimately pay the price.”
Tweets of the Week
Until Thursday,
The Bear Cave
I love how straightforward and detailed this article is! But one annoyance I have is about giving short/buy remarks on various tickers. Oftentimes I’ll read something like this which says one thing about a stock, e.g. short $YELP, and then read something else that says the exact opposite! Can be very confusing. What do you think?