The Bear Cave #218
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Marqeta (MQ)” and “Problems at Primerica (PRI)” and our next premium investigation comes out Thursday, May 2.
Following The Bear Cave’s article on Primerica, the company issued a press release “in response to a blogger who published a misleading opinion about Primerica with the intent to drive down its stock price.” Primerica wrote:
“Their assertions and conclusions about Primerica are false. They do not accurately portray what Primerica’s licensed sales force does every day to assist middle-income families. Accordingly, we believe the blog is a self-interested attempt to profit at the expense of Primerica’s stockholders.”
In reality, Primerica’s statement is false because The Bear Cave never takes positions against the companies we write about and instead only makes money from reader subscriptions. The Bear Cave stands by our reporting.
New Activist Reports
Spruce Point Capital published a 24,326-word presentation on PowerSchool Holdings (NYSE: PWSC — $3.54 billion), a software provider for schools in North America. Spruce Point said the company “is experiencing ongoing headwinds due to issues with student privacy laws, financial strain from aggressive accounting tactics, and depletion of federal funding.” Spruce Point claimed the company’s software may face renewal pressure as schools lose pandemic-related stimulus and noted the company’s private equity backer, Vista Equity, has begun selling down its stake.
Hindenburg Research published a second article on Temenos (Switzerland: TEMN — CHF4.79 billion), a Swiss financial software company. In February, Hindenburg alleged “major accounting irregularities” at Temenos and now raised more concerns about the company’s recently completed internal investigation into Hindenburg’s allegations. Hindenburg wrote, in part,
“While the examination leads by saying we made ‘inaccurate and misleading allegations,’ the content of the examination’s findings indicates the opposite – a tacit confirmation of accounting manipulation and disclosure violations at Temenos, spun with lawyer-speak and gaslighting.”
Hindenburg said it is still short Temenos and “is actively considering our own litigation options.”
Sunshine Research published a Twitter thread on Lion Electric (NYSE: LEV — $219 million), a Canadian electric school bus company. Sunshine Research said the company “could be forced to execute a highly dilutive capital raise or file for bankruptcy in the next 3-6 months” and predicted that recent layoffs, product safety issues, and consistent cash burn “will exhaust [the company’s] cash and revolver capacity by July/August 2024.”
Hunterbrook Media, a new media outlet that shares its stories in advance with an affiliated hedge fund, published on Sable Offshore (NYSE: SOC — $625 million), an oil and gas company focused on developing “the prolific Santa Ynez Unit in federal waters offshore California.” Hunterbrook wrote, in part,
“Hunterbrook Media’s Editorial Board believes that Sable Offshore will not restart production at Santa Ynez on time, if at all. Sable listed on NYSE via SPAC as SOC earlier this year. The company’s auditors have since flagged Sable’s ability to continue as a ‘going concern.’ Our Editorial Board agrees…
The CEO’s most recent prior company, Sable Permian Resources, went bankrupt. Before that, he flamed out from Freeport-McMoRan. Now, he and his repeat management team seem to be relying on a highly speculative gamble at the mercy of California regulators, litigators, and communities.”
Hunterbrook also disclosed that “Hunterbrook Media provided the article to its investment affiliate, Hunterbrook Capital,” which is short Sable Offshore.
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO of Jabil Inc (NYSE: JBL — $14.3 billion) “was placed on a paid leave pending completion of an investigation related to corporate policies” after just one year on the job. In October, Jabil’s Chief Human Resources Officer departed and later joined a much smaller company according to her LinkedIn.
CFO of Vir Biotechnology (NASDAQ: VIR — $1.07 billion) resigned after a little over one year “to pursue another career opportunity.” The company’s Chief Medical Officer also resigned in February “to spend more time with his family” and last year the company’s CEO and Chief Operating Officer both departed.
CFO of Graphjet Technology (NASDAQ: GTI — $1.06 billion) resigned “due to health reasons effective immediately” after a little over two years. The Malaysian company is down ~35% since its SPAC merger last month.
CEO of Diamondrock Hospitality (NYSE: DRH — $1.86 billion) “departed” immediately after nearly 15 years running the company he co-founded. This week the REIT Chief Investment officer also “departed” immediately after ten years and in March the General Counsel retired after nearly fifteen years.
President of Research and Development at Sana Biotechnology (NASDAQ: SANA — $1.67 billion) “resigned voluntarily for personal reasons” after one year. Last year, the company’s Chief Medical Officer “entered into a transition agreement and release agreement” and the company is down ~80% since its February 2021 IPO.
Sharon Rothstein, board member of Block (NYSE: SQ — $43.4 billion), said she “would not stand for re-election” after two and a half years. The company disclosed that “Ms. Rothstein's decision to not stand for re-election was a result of wanting to devote more time to other professional and personal activities.” Ms. Rothstein continues to serve on the board of Yelp.
Two weeks ago, The Bear Cave published on problems at Marqeta (MQ), a large Block partner, and noted that the combined companies have seen a large number of executive and board departures. In February, Larry Summers, former United States Secretary of the Treasury, “informed Block that he is resigning as a member of the board of directors of the company, effective immediately, in order to devote more time to his other professional and personal commitments.” Mr. Summers also continues to serve on the boards of two other public companies.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“The Shortseller Enrichment Commission?: Whistleblowers, Activist Short Sellers, and the New Privatization of Public Enforcement” (Academic Paper)
“Two developments have transformed the detection of corporate fraud in the last decade: the SEC whistleblower bounty program (WBP) and the rise of activist short sellers. The WBP offers up financial bounties to individuals who bring forward actionable information about securities fraud. Activist shorts conduct due diligence to identify overvalued public companies, take short positions, reveal the negative information, and then enjoy trading profits if and when the stock tanks. Considered separately, these institutions are widely regarded as socially valuable innovations that help deter fraud.
But, it turns out, they are not fully separate. Activist shorts have been participating actively and effectively in the WBP – both directly (submitting tips, filing claims, and winning awards) and indirectly (partnering with insider tipsters). Their participation has transformed the WBP into an undercover outsourcing program; a new way for the SEC to pay private professionals to do work that traditionally has been done by SEC staff.”
Letter from Truth Social CEO Devin Nunes to NASDAQ CEO (SEC)
“I write to bring your attention to potential market manipulation of the stock of Trump Media & Technology Group Corp…. As you know, ‘naked’ short selling—selling shares of a stock without first borrowing the shares of stock deemed difficult to locate—is generally illegal pursuant to Securities and Exchange Commission Regulation SHO. As of April 17, 2024, DJT appears on Nasdaq’s ‘Reg SHO threshold list,’ which is indicative of unlawful trading activity.”
“Ken Griffin’s trading firm blasts Trump Media boss as ‘loser’” (FT)
“Devin Nunes is the proverbial loser who tries to blame ‘naked short selling’ for his falling stock price… Nunes is exactly the type of person Donald Trump would have fired on The Apprentice. If he worked for Citadel Securities, we would fire him, as ability and integrity are at the center of everything we do.”
Tweets of the Week
Until next week,
The Bear Cave