The Bear Cave #211
New Activist Reports, Recent Resignations, and Tweets of the Week
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 this Thursday, March 7.
New Activist Reports
Kerrisdale Capital published a follow-up report on Carvana (NYSE: CVNA — $16.8 billion), an online platform for buying and selling used cars. Kerrisdale raised concerns about the company’s valuation and challenging growth prospects and said the company is “a poorly capitalized, growth-challenged auto retailer now valued at an absurd 42x EV/2024E EBITDA.” Kerrisdale also published a letter to Carvana’s auditor, Grant Thornton, raising concerns about its auto financing agreements with DriveTime Automotive. Kerrisdale wrote, in part,
“Carvana’s relationship with DriveTime is far from arm’s length, in our opinion. DriveTime is controlled by Ernie Garcia II, a controlling shareholder of Carvana and father of Carvana’s CEO Ernie Garcia III, making them literally related parties.”
Capybara Research published on SoundHound AI (NASDAQ: SOUN — $1.54 billion), an AI-powered speech recognition company. Capybara raised concerns about erroneous media reporting about a “recent” investment from Nvidia that was actually made in 2017 and noted that the company’s AI-powered music detection app ranks far below competitors. In addition, Capybara predicted the company had “a mere 15 months of operational cash left.”
In July 2023, Culper Research called the company “a flailing AI wannabe trading at 22x revenues that has misled investors.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO, CFO, and Principal Accounting Officer of Chemours (NYSE: CC — $3.08 billion) were placed on administrative leave “pending the completion of an internal review being overseen by the Audit Committee of the Board of Directors with the assistance of independent outside counsel, which scope includes the processes for reviewing reports made to the Chemours Ethics Hotline, the company’s practices for managing working capital, including the related impact on metrics within the company’s incentive plans, certain non-GAAP metrics included in filings made with the Securities and Exchange Commission or otherwise publicly released, and related disclosures.”
CEO of Outbrain (NASDAQ: OB — $174 million) “mutually determined that [he] will step down from his role” after nearly eighteen years. The company is down ~80% since its July 2021 IPO.
CEO of SunPower Corp (NASDAQ: SPWR — $558 million) resigned “for good reason” effective immediately after nearly three years and also left the board. Another board member also departed immediately after two and a half years.
CEO of New York Community Bancorp (NYSE: NYCB — $2.56 billion) resigned “effective immediately” after three years. Board member Mr. Hanif (Wally) Dahya also resigned “effective immediately” because he “did not support the proposed appointment of Mr. DiNello as President and CEO of the company.” Two weeks ago, Ms. Toan Huynh also resigned from the board after a little over one year because “she is pursuing other interests.” Ms. Huynh also previously served on the board of Sunlight Financial Holdings for two years until the firm’s October 2023 bankruptcy. New York Community Bancorp stock is down ~70% in the last six months over loan loss and liquidity concerns and also delayed its 10-K after finding “material weaknesses in the company’s internal controls related to internal loan review.”
CFO of Alpine Income Property Trust (NYSE: PINE — $210 million) resigned after three and a half years “to pursue another opportunity with a new venture not in the REIT industry.” The company’s prior CFO also resigned after just one year and the company is audited by Grant Thornton.
CFO of Synaptics (NASDAQ: SYNA — $4.16 billion) resigned “effective immediately, to pursue a new opportunity” after four and a half years. The company’s 64-year-old Chief Accounting Officer and 57-year-old General Counsel also both retired in September 2023.
Chief Credit Officer of FS Bancorp (NASDAQ: FSBW — $253 million) “is no longer Chief Credit Officer at the Bank” just six months after being promoted into that position.
Chief Lending Officer for Commercial and Industrial at Eagle Bancorp (NASDAQ: EGBN — $707 million) retired after nearly ten years. Last year the company’s President of Commercial Banking was “terminated without cause” after twelve years. The company is audited by Crowe LLP and seven individuals have left the company’s board in the last five years.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“SEC Charges Lordstown Motors with Misleading Investors about Company’s Flagship Electric Vehicle” (SEC)
“According to the SEC’s settled order, Lordstown exaggerated the demand for the Endurance, claiming that the company had received more than 100,000 nonbinding ‘pre-orders’ for the vehicle from commercial fleet customers when, in reality, most of the pre-orders came from companies that did not operate fleets or intend to buy the truck for their own use. The SEC’s order also found that Lordstown misrepresented the company’s timeline for delivering the Endurance by failing to account for production delays partially due to Lordstown’s inability to access many critical parts.”
“How Panera Bread Ducked California’s New $20 Minimum Wage Law” (Bloomberg)
“A California law that’s about to raise the state minimum wage at fast-food spots to $20 an hour from $16 offers an unusual exemption for chains that bake bread and sell it as a standalone item. Governor Gavin Newsom pushed for that break, according to people familiar with the matter. Among the main beneficiaries is Flynn, a longtime Newsom donor whose California holdings include two dozen Panera Bread locations.”
Tweets of the Week
Until Thursday,
The Bear Cave