The Bear Cave #205
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Chegg (CHGG)” and “Problems at a $6 Billion+ Recent Tech IPO” and our next premium investigation comes out Thursday, February 1.
Also, The Bear Cave is opening up comments on our articles to paid readers. We look forward to responding to each one.
New Activist Reports
Culper Research published a Twitter thread on Jin Medical International (NASDAQ: ZJYL — $822 million), a Chinese manufacturer of wheelchairs and other aids. Culper called the company “a China Hustle-style charade” and highlighted that Jin Medical’s recent announcements of major orders come from entities secretly controlled by Jin Medical’s CEO and CFO. Culper also raised concerns about Jin Medical’s auditor and wrote:
“Current [Jin Medical] auditor DNTW [Toronto] appears to have been previously shut down and its partners charged by the SEC for its role in another China fraud, Subaye, which claimed to be running a cloud business that didn't exist.”
Culper also highlighted the company has loaned money to its executives, trades at ~45x revenue, and had its audit chair resign in December. Culper concluded that “NASDAQ and the SEC ought to halt shares to protect investors from yet another obvious China-based con.”
Old Time REITster published an 8,280-word article on Blackstone Mortgage Trust (NYSE: BXMT — $3.55 billion), a mortgage REIT focused on commercial real estate in North America, Europe, and Australia. Old Time REITster wrote, “Blackstone Mortgage faces many impairments in 2024, in my opinion, due to loans on office properties throughout the U.S., hotels in San Francisco, and toxic legacy assets of Banco Popular.” Specifically, Old Time REITster said that “Hyatt Regency SOMA San Francisco missed a balloon payment of $260 million [and the] property is estimated to be worth $200 million less than the Blackstone Mortgage’s loan amount.”
Last month, Muddy Waters also published on Blackstone Mortgage Trust and alleged that “interest rate swaps and manipulated risk ratings/loss provisions have obscured serious deterioration in BXMT’s loan book.” Carson Block of Muddy Waters also published an interview with Old Time REITster on his Zer0esTv channel.
Bleecker Street Research published on LuxUrban Hotels (NASDAQ: LUXH — $146 million), a Miami-based hotel operator. Bleecker Street called the company “a roll-up of castoff hotels financed by loan sharks, with shaky financials, run by a management team with a history of related party fraud allegations and no background in running hotels.”
Spruce Point Capital published on MSCI Inc (NYSE: MSCI — $43.8 billion), an investment services and index company. Spruce Point raised concerns about the “accuracy of its accounting choices and financial reporting, durability of its growth prospects, and sustainability of its extreme valuation multiple.” Specifically, Spruce Point questioned whether the company’s ESG and Climate segment could maintain its recent growth.
J Capital Research published on Hut 8 Corp (NASDAQ: HUT — $615 million), a Miami-biased digital asset miner. J Capital highlighted that Hut 8 recently acquired a bitcoin miner partly owned by “a 30-year-old used-car salesman from Vancouver whose history is littered with involvement in SEC-defined pump-and-dumps.” J Capital concluded that “shareholders are likely to feel the pain of being on the wrong side of an over-levered pump-and-dump, only to be left holding the most inefficient Bitcoin miner, which is unprofitable even at a Bitcoin price of over $60,000.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO of Definitive Healthcare (NASDAQ: DH — $1.35 billion) was “terminated without cause” after one and a half years and also departed the board. The company’s Chief Revenue Officer departed in November and the company is down ~80% since its September 2021 IPO.
CFO of Eaton Corporation (NYSE: ETN — $97.7 billion) resigned “for personal reasons” after nearly three years. In the last twelve months, the company’s Deputy Chief Legal Officer, President of Americas, and President of Aerospace all departed.
CEO of Compass Minerals International (NYSE: CMP — $872 million) entered into “a separation and consulting agreement” after nearly five years and also departed the board. The company’s Chief Commercial Officer, who was previously the company’s CFO, departed this month as well and the company’s Chief Accounting Officer departed in December after two years. In December, the company also dismissed Ernst & Young LLP as its auditor. The company has had six different CFOs in the last ten years.
CEO of Wendy’s (NASDAQ: WEN — $3.96 billion) “will cease to be the President and Chief Executive Officer of the Company, and will resign from the Board and all Board committees on which he served” after nearly eight years with the company. The departure is a “termination without cause.”
Chief People Officer of Alignment Healthcare (NASDAQ: ALHC — $1.34 billion) departed after six months. The company’s Chief Operating Officer, General Counsel, and Chief Legal Officer all departed last year as well.
Principal Accounting Officer of Genworth Financial (NYSE: GNW — $2.78 billion) “resigned from this position effective immediately” after just eight months. The company has had three different CFOs in the last five years.
Chief Growth Officer of Mercury Systems (NASDAQ: MRCY — $1.83 billion) departed after eleven months. The company’s Vice President of Mission Systems also departed after one year in December and the company has had two different CEOs, three different CFOs, and three different Chairmen in the last three years. In July 2022, GlassHouse Research called Mercury Systems “a deteriorating roll-up that is set to implode” and alleged the company prematurely recognized revenue among other alleged accounting issues.
Chief Business Officer of HilleVax (NASDAQ: HLVX — $718 million) departed after one year. The company is down ~20% since its April 2022 IPO.
Chief Medical Officer of LifeStance Health (NASDAQ: LFST — $2.58 billion) “is stepping down to spend more time with her family” after five years. In the last two years, the company’s CEO/Chairman, CFO, Chief Operating Officer, and Chief People Officer have all departed as well. In October 2023, The Bear Cave “uncovered dozens of complaints concerning overbilling, fraudulent billing, and unfair and deceptive business practices” at LifeStance.
Sheryl Sandberg, board member of Meta Platforms (NASDAQ: META — $985 billion) and the company’s former Chief Operating Officer, “has decided not to stand for re-election to the company's board of directors” after twelve years.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
Letter from Marc Cohodes and James Gibson to B. Riley Auditor at Marcum (Letter)
“We believe it is imperative that your firm’s audit of B. Riley thoroughly examine and test a variety of risks and irregularities, especially considering recent criminal information and SEC charges as well as certain public statements made by B. Riley’s CEO, Bryant Riley.”
“Knicks Owner James Dolan Accused of Sexual Assault” (WSJ)
“‘James Dolan manipulated me, brought me to California to abuse me, and then set me up for a vicious attack by Weinstein,’ Croft said in a statement. ‘My hope is that my lawsuit will force Dolan to acknowledge what he did to me and to take responsibility for the harm he has caused.’”
“Best Short Call of 2023 Belongs to Amateur ‘Dirty Bubble’ Sleuth” (Bloomberg)
“The best short call of 2023 wasn’t made by a ruthless hedge fund, a well-known activist firm, or any of the liveliest voices on the sell side. It was made by a first-year medical resident running a blog named after a SpongeBob SquarePants character.”
Tweets of the Week
Until next week,
The Bear Cave