The Bear Cave #207
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at a $6 Billion+ Recent Tech IPO” and “Problems at a Billion Dollar Mess” and our next premium investigation comes out Thursday, February 15.
New Activist Reports
Safkhet Capital published on Adtalem Global Education (NYSE: ATGE — $1.90 billion), “a for-profit university operator that has benefited from billions in public funds.” Safkhet wrote, “After our extensive research, including interviews with former executives and students, we believe the business model is simple: fast and loose admissions made possible by aggressive and sometimes deceptive tactics.” Safkhet also alleged the Department of Education launched an undisclosed investigation into the company. In addition, Safkhet shared a new website, DebtForDegree.com, to cover the for-profit education space and wrote, in part,
“We can all agree that the level of student debt in the US has reached crisis levels and presents a startling risk for losses. If unscrupulous operators have, by way of greed, negligence, or deception, contributed to these inevitable losses, then we should support every effort made to recoup those funds and strengthen oversight over future funding. This is not about ‘unfairly’ discharging loans for certain borrowers, but holding serial abusers of public funds accountable.”
Independent Researcher Lauren Balik published on CAVA Group (NYSE: CAVA — $5.67 billion), a fast-growing chain of Mediterranean restaurants. Ms. Balik said CAVA “is primed for a major public health crisis” and noted three of CAVA’s eleven NYC locations have “B” or “C” health grades.
Hindenburg Research published on LifeStance Health Group (NASDAQ: LFST — $2.28 billion), a private-equity back mental health and therapy rollup. Hindenburg alleged the company “needs to raise cash imminently” given its high debt and declining cash balance. Hindenburg also said the company’s claimed annual clinician retention disclosures (~80% stay year-to-year) were inflated and that its data scrapes found an annualized clinician retention rate closer to ~72%. Hindenburg concluded,
“We think LFST is a classic example of what happens when PE meets a ‘hot’ sector: Massive debt fueling a grinding, metric-focused culture resulting in worse quality of care for patients, a worse environment for clinicians and long-term losses for the average investor.”
In October, The Bear Cave also published on LifeStance Health and “uncovered dozens of complaints concerning overbilling, fraudulent billing, and unfair and deceptive business practices.”
The Friendly Bear published on P10 Inc (NYSE: PX — $1.02 billion), a growing asset management and hedge fund company. The Friendly Bear alleged that the company’s leadership and a related-party lender “made out with hundreds of millions of dollars of PPP loan fees generated from breakneck production of PPP loans that were largely fraudulent and not properly underwritten.”
Fat Baby Funds published on Celsius Holdings (NASDAQ: CELH — $12.4 billion), a fast-growing energy drink company. Fat Baby Funds alleged the company made misleading statements in its marketing and has weaknesses in its accounting, among other issues.
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Waldencast PLC (NASDAQ: WALD — $833 million) resigned “effective today” after a little over one year. The company is down ~30% since its three-way SPAC merger in July 2022.
CEO of iRobot Corporation (NASDAQ: IRBT — $363 million) “stepped down” after 27 years and also departed the board. The company is down ~65% over the last month after Amazon called off its attempted acquisition of the company following opposition from European antitrust regulators.
President of Energy at Nikola (NASDAQ: NKLA — $843 million) “is transitioning from the company” after just four months. In December, the company’s CFO resigned “to pursue other opportunities” after just eight months and in August the company’s CEO stepped down after nine months “due to a family health matter.”
Vince McMahon, Executive Chairman of TKO Group Holdings (NYSE: TKO — $14.7 billion), resigned “with immediate effect” after just four months. On Friday, the Wall Street Journal reported that “Federal authorities have been investigating sexual assault and sex trafficking allegations against WWE co-founder Vince McMahon.” Mr. McMahon was previously the longtime CEO of WWE, which merged with Endeavor Group’s UFC to form TKO Group.
Chief Accounting Officer of Cooper-Standard Holdings (NYSE: CPS — $300 million) resigned after one and a half years “to pursue other career opportunities.” In June 2023, the company’s Chief Legal and Transformation Officer resigned after four years “to pursue another opportunity outside of the automotive industry” and in July 2022 the company’s prior Chief Accounting Officer resigned after just ten months “to pursue other career opportunities in another industry.”
General Counsel of Cavco Industries (NASDAQ: CVCO — $2.86 billion) resigned “in connection with a termination for good reason” after five years. The company has had four different CFOs in the last five years and is audited by RSM US LLP.
John Shoven, board member of Cadence Design Systems (NASDAQ: CDNS — $80.7 billion), notified the board of his decision to retire from the board and not seek re-election at the company's 2024 Annual Meeting of Stockholders, when his current term expires. The company added,
“The Board expressed its deep appreciation for Dr. Shoven's 32 years of service on the Board, including 16 years as Chair of the Board, and for his invaluable contributions to the Company.”
During Dr. Shoven’s tenure, one share of Cadence stock rose from ~$4.50 per share in 1992 to roughly ~$296 per share today, a return of ~6,570%.
(Editor’s note: Dr. Shoven was my academic advisor and mentor for all four years of college – and he was the first reader of this publication when it was launched following a conversation in his office in February 2020. We love you John!)
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Missing Boxes, an Email From China: How a Chip Shipment Sparked a U.S. Probe” (WSJ)
“The probe adds a new dimension to federal authorities’ suspicions about San Diego-based TuSimple’s dealings in China, after the U.S. government previously ordered the company to segregate its American and Chinese businesses.
The A100 chips, which TuSimple planned to use to improve its self-driving technology for semi trucks, are among Nvidia’s most powerful processors for high-performance computing and artificial intelligence. While the chips are permitted to be sent to Australia, Biden administration restrictions prohibit their transfer to China as part of an effort to keep American technology from aiding China’s military buildup.”
“New York Asks Realty Company to Investigate Sexual Assault Allegations” (NYT)
“The state comptroller wants eXp Realty to look into allegations that female real estate agents were drugged and assaulted during company events… In two separate lawsuits, five current and former agents at eXp Realty said that two top agents at the brokerage drugged and them assaulted them at separate eXp recruiting events. Four of them said they were subsequently sexually assaulted, and The Times investigation uncovered a pattern of eXp leadership silencing those who tried to make reports.”
“23andMe’s Fall From $6 Billion to Nearly $0” (WSJ)
“At the center of 23andMe’s DNA-testing business are two fundamental challenges. Customers only need to take the test once, and few test-takers get life-altering health results… Wojcicki’s most ambitious bet is developing drugs using 23andMe’s stockpile of more than 10 million DNA samples that test-takers have agreed may be used for research. But getting new drugs to market is expensive and takes years.”
Tweets of the Week
Until next week,
The Bear Cave