The Bear Cave #210

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

Feb 25, 2024

Welcome to The Bear Cave! Our last premium articles were “Problems at a Billion Dollar Mess” and “More Problems at B. Riley (RILY)” and our next premium investigation comes out Thursday, March 7.

New Activist Reports

The Friendly Bear published an open letter to Randall Paulson, chairman of the audit committee for B. Riley Financial (NASDAQ: RILY — $479 million), an investment bank and financial services company. The Friendly Bear, which has no affiliation with The Bear Cave, alleged that B. Riley didn’t properly disclose its loan to alleged fraudster Brian Kahn and claimed the audit committee “has a long history of serious independence problems” in part because B. Riley financed an investment by Mr. Paulson’s private equity firm.

Blue Orca Capital published on Fluence Energy (NASDAQ: FLNC — $2.57 billion), a clean energy storage and software company. Blue Orca alleged that “undisclosed to investors, the US affiliate of Siemens, [Fluence’s] parent and largest shareholder, is suing [Fluence] for false representations and fraud.” Blue Orca obtained the litigation by sending a courier to a court in Arlington, Virginia, and said the allegations could “be setting in motion of tidal wave of stock dilution and selling pressure on Fluence’s stock as its major corporate parents sell down their respective stakes and likely withdraw their massive historical support.” The litigation “alleges a laundry list of embarrassing and costly engineering and design failures” that Blue Orca believes is part of a larger trend at Fluence.

Fuzzy Panda Research published on AirSculpt Technologies (NASDAQ: AIRS — $336 million), a fat removal and “body contouring” company. Fuzzy Panda called the company “a Liposuction Chop-Shop” and alleged the company was listed as the “cause of death” in 2022 for a young mother in San Diego. Fuzzy Panda also noted that AirSculpt’s former Director of Safety “lost his medical license due to gross negligence resulting in a patient death” and one of AirSculpt’s cosmetic surgery specialists previously had his medical license revoked for substance abuse after he “operated on patients the very same day that he was hospitalized for an opioid overdose.”

Fuzzy Panda also alleged the company would photoshop its before and “after” photos because some of the photo metadata said, “creator tool: Adobe Photoshop.”

Gotham City Research published an update on Grifols (NASDAQ: GRFS — $7.70 billion), a Spanish pharmaceutical company. Gotham issued a series of questions to the company and specifically asked about who received the company’s approximately 110 million Euro of “non-current loans to related parties.” Last month, Gotham City alleged the company “manipulates reported debt & EBITDA to artificially reduce reported leverage.”

More Resignations at Planet Fitness

On Monday, the CFO of Planet Fitness (NYSE: PLNT — $5.62 billion) resigned after nearly five years and “has agreed to remain through August 2024 to afford the company sufficient opportunity to identify and retain a new CFO.” The outgoing CFO will “receive a one-time cash bonus of $500,000 if he remains employed by the company through August 31, 2024.”

Last week, Planet Fitness’s former CEO, Chris Rondeau, resigned from the board after over eight years and shared a typo-ridden resignation email that reads, in part,

“Although I know my thoughts fall on deaf ears I feel it’s important to be straightforward and transparent with some thoughts of mine. From the little I know we are not any closer in the CEO search then we were in 4th qtr… As we know when this new CEO is found, hopefully with much larger experiences than I with large franchise experience, 1000’s+ units big brand experience and international experience, they will have their own ideations of how this company should be positioned and built therefore once again be more changes just months away and could rewind the stuff we are allowing to happen now. In my opinion it seems reckless and negligent…
It pains me to see/hear where the people and franchisees are at and with no end in sight as they have ton of angst not knowing who or when this new CEO will be in place. Thanks for taking the time to read.” (Typos in original email.)

The Bear Cave previously raised numerous concerns with Planet Fitness. In January 2023, The Bear Cave “uncovered hundreds of consumer complaints concerning overbilling, fraudulent transactions, excessive fees, and uncancellable memberships.” The Bear Cave concluded, in part,

“After reviewing the evidence, The Bear Cave is left wondering whether Planet Fitness is actually a thriving gym franchise or an illegal billing operation with gyms on the side.”

In February 2023, The Bear Cave also highlighted potential governance issues at Planet Fitness and wrote,

“In sum, Planet Fitness’s CEO and co-founder have an entity for ‘miscellaneous financial investment activities’ with unknown assets that does business with an unknown number of franchisees.”

Earlier this week, one of Planet Fitness’s other co-founders, Mike Grondahl, tweeted “Hearing there is another big shakeup at PLNT” and “Where there’s smoke” followed by a news article about Mr. Rondeau’s resignation.

Other Recent Resignations

Notable executive departures disclosed in the past week include:

CEO of MoneyHero (NASDAQ: MNY — $94 million) resigned after eleven months. The company is down ~75% since its October 2023 merger with a Peter Thiel-backed SPAC.
CEO of Icahn Enterprises (NASDAQ: IEP — $8.15 billion) resigned after a little over two years and will also leave the board. The company has had four different CEOs and three different CFOs in the last three years. In May 2023, Hindenburg Research alleged the company was propped up by “inflated valuation marks for IEP’s less liquid and private assets” and an artificially high dividend. Shares are down ~60% in the last year and the company is audited by Grant Thornton.
CFO of Health Catalyst (NASDAQ: HCAT — $448 million) informed the board of his resignation on February 16 after three years in the role “and on February 20, the Board accepted his resignation, effective March 1, 2024.” The company “expects to enter into a separation agreement in connection with [the] departure.” In addition, a board member resigned this week and in April 2023 the company’s General Counsel resigned “to pursue other opportunities.” In March 2023, the company’s Chief Operating Officer also resigned due to “being called by the leadership of the Church of Jesus Christ of Latter-Day Saints to serve for 3 years as Mission President of the Puerto Rico San Juan Mission.” The Utah-based company is down ~80% since its 2019 IPO.
CEO of QuidelOrtho Corp (NASDAQ: QDEL — $3.13 billion) was “terminated” after fifteen years and also left the board.
Chief Commercial Officer of Yeti Holdings (NYSE: YETI — $3.26 billion) was “terminated” after one and a half years.
Chief Accounting Officer of ZoomInfo Technologies (NASDAQ: ZI — $6.55 billion) resigned after three years. In May 2022, The Bear Cave “obtained hundreds of pages of consumer complaints from small businesses desperate to cancel ZoomInfo contracts” and found that “ZoomInfo often renews contracts against the wishes of its customers, threatens litigation to enforce renewals, and has admitted to the Washington State Attorney General of sometimes doing renewals ‘in error.’”
Peter Thiel, director of AbCellera Biologics (NASDAQ: ABCL — $1.43 billion), resigned “for personal reasons” after three and a half years. The company is down ~90% since its December 2020 IPO.
Ann Fandozzi, board member of RB Global (NYSA: RBA — $14.0 billion), resigned after four years. Ms. Fandozzi, who served as the company’s CEO until July 2023, wrote in her resignation letter: “I feel that I am forced to resign because I no longer can stand by and watch current management allow short-term cost savings to be placed at a higher priority than long-term success and value creation.”

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

What to Read

“An Executive Bought a Rival’s Stock. The SEC Says That’s Insider Trading.” (WSJ)

“The SEC alleges Panuwat purchased options tied to the shares of Incyte, a rival drugmaker, because he knew they would pay off when the market heard Pfizer was buying his company, Medivation, in 2016…
The SEC says two facts about Panuwat’s trading show it was illegal. First, his employer, Medivation, had a policy that forbade trading other companies’ shares when employees had material nonpublic information about Medivation. And second, Panuwat traded on his work computer just seven minutes after he allegedly learned that Pfizer would buy his company.”

“SEC Charges Husband of Energy Company Manager with Insider Trading” (SEC)

“According to the SEC’s complaint, Loudon allegedly misappropriated material, nonpublic information about the proposed acquisition from his wife, a BP mergers and acquisitions manager who worked on the planned deal. The SEC alleges that Loudon overheard several of his wife’s work-related conversations about the merger while she was working remotely. Without his wife’s knowledge, Loudon purchased 46,450 shares of TravelCenters stock before the merger was announced…
After Loudon’s confession, Loudon’s wife moved out of their house and generally ceased all contact with Loudon. A few weeks later, Loudon delivered a handwritten note to his wife apologizing for violating her trust and asking for forgiveness. Loudon’s wife initiated divorce proceedings in June 2023.”

“B. Riley Financial Board of Directors Issues Statement Regarding Internal Review” (B. Riley)

“Over the past year, persons acting to manipulate the price of the company's stock and to profit from that manipulation have sought to overwhelm the company and its partners, advisors, employees and clients with baseless claims of alleged wrongdoing by B. Riley Financial, often accompanied by outrageous personal harassment. Their actions have far exceeded the acceptable limits of financial research and are an attempt to actively damage our business to justify their inaccurate claims…
Finally, the B. Riley Financial Board confirms its confidence in the integrity of the company's reporting with respect to these matters.”

Warren Buffett’s Letter to Shareholders (Berkshire Hathaway)

“In 1863, Hugh McCulloch, the first Comptroller of the United States, sent a letter to all national banks. His instructions included this warning: ‘Never deal with a rascal under the expectation that you can prevent him from cheating you.’ Many bankers who thought they could ‘manage’ the rascal problem have learned the wisdom of Mr. McCulloch’s advice – and I have as well. People are not that easy to read. Sincerity and empathy can easily be faked. That is as true now as it was in 1863.”