The Bear Cave #225
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at AMC Entertainment (AMC),” a special investigation into “More Problems at RCI Hospitality Holdings (RICK),” and “Problems at Globe Life (GL)” and our next premium investigation comes out Thursday, June 20.
New Activist Reports
Scorpion Capital published a 334-slide investigation into Lasertec Corporation (Tokyo: 6920 — 3.27 trillion yen), a Japanese semiconductor equipment supplier. Scorpion said Lasertec’s semiconductor wafer EUV mask inspection machine is “defective” and called the company “one of the largest corporate frauds in Japanese history.” Scorpion conducted “an intensive 5-month investigation encompassing over 20 research interviews and ~20 investigator field visits” and found that the company’s new innovation park “is a brazen fraud” based on the investigator field visits which found “a generally deserted facility with no R&D or production activity.” In addition, Scorpion alleged the company’s largest customers (TSMC, Intel, and Samsung) were furious over the company’s poor product quality. Scorpion also alleged the company was “a textbook accounting scheme faking revenue, margins, and earnings” and had an abnormally high level of inventory and an aggressive 17x revenue valuation.
In response, the company originally put out an extremely brief two-sentence statement and said, “We clearly deny the allegation of improper accounting practices.” Later the company put out a two-page denial and said inventory had grown in line with rapid sales growth.
Hindenburg Research published on Axos Financial (NYSE: AX — $2.97 billion), a Nevada-based bank formerly known as Bank of Internet. Hindenburg alleged that Axos has “glaring commercial real estate loan problems” and heavy exposure to New York City properties. Hindenburg also interviewed 21 former employees and concluded,
“Overall, Axos' exposure to the riskiest asset classes, its lax underwriting standards, and glaring issues with its portfolio indicate that the company faces significant stress ahead.”
In response, Axos called Hindenburg’s report “a series of misleading, incomplete, and false allegations centered on the quality of Axos’ commercial real estate loan portfolio” and provided additional details on several portfolio loans.
In November 2023, The Bear Cave published on Axos and wrote that “risks in the firm’s culture, loan portfolio, and crypto ventures are not fully appreciated by the market.” The Bear Cave also highlighted that the Axos’s Vice President of Commercial Real Estate, Vice President of Income Property Lending, and CEO all worked at IndyMac bank in the years before it failed.
Bonitas Research published on Cibus Inc (NASDAQ: CBUS — $268 million), a crop gene editing company. Bonitas alleged that the company’s technology leads to “lower crop yields and lost revenues” for farmers and highlighted:
“As of 1Q’24, CBUS had ~US$ 24 million in cash balance, burned ~US$ 5 million in cash per month and generated less than ~US$ 200,000 in monthly revenues.”
Kerrisdale Capital published a Twitter thread to “launch a war against bitcoin miners.” In particular, Kerrisdale criticized Riot Platforms (NASDAQ: RIOT — $2.81 billion), which Kerrisdale described as “a dysfunctional hamster wheel of cash burn [that] loots retail shareholders with non-stop ATM issuance to fund operations.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO of FREYR Battery (NYSE: FREY — $289 million) departed after ten months and is also leaving the board. In addition, the company’s CFO resigned “for personal reasons” after a little over two years. The company’s prior CEO was “terminated” in August 2023 after five years and the company is down ~80% since its July 2021 SPAC merger.
CFO of Hertz Global Holdings (NASDAQ: HTZ — $1.14 billion) “is leaving the company to pursue other opportunities” after nearly one year. The company’s new CFO previously served as CFO of Spirit Airlines for the last six years, during which time the airline fell ~90%. Hertz’s Chief Operating Officer also resigned this week after seven months and will receive “$2.25 million in cash to be paid over 18 months” as part of his severance. The company has had four different CEOs and three different CFOs in the last three years and has fallen ~80% over the last year.
CEO of Semtech Corp (NASDAQ: SMTC — $2.01 billion) was “terminated without cause” and departed the board after one year. The company said, “The Board's decision resulted from differences between the Board and Mr. Pickle on how the CEO and the Board should work together in the best interests of stockholders.”
CFO of Carriage Services (NYSE: CSV — $430 million) resigned after a little over one year and the company said it “engaged an executive search firm to help identify a Chief Financial Officer with the financial sophistication necessary to help drive and execute on the company's long-term strategic growth plan.” The company is audited by Grant Thornton.
CFO of Compass Minerals International (NYSE: CMP — $553 million) resigned “effective immediately, to pursue other opportunities” after two and a half years. The company’s Chief Accounting Officer also “retired” in December after two years and that month the company also switched auditors from Ernst & Young to KPMG. The company has had seven different CFOs in the last ten years.
CFO of Broadridge Financial Solutions (NYSE: BR — $23.4 billion) “stepped down” after three and a half years to become CFO of Aon (NYSE: AON — $61.6 billion).
CEO of Lattice Semiconductor (NASDAQ: LSCC — $8.36 billion) “stepped down” after six years to become CEO of Coherent Corp (NYSE: COHR — $10.1 billion).
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Short Sellers in Danger of Extinction After Crushing Stock Gains” (Bloomberg)
“‘Our fund side of our business was just dwindling — people just didn’t want to invest,’ says Jim Chanos, the legendary short seller renowned for calling Enron Corp.’s demise. ‘Investors — primarily institutional investors — have just given up on the fact that there’s going to be excess returns on the short side.’”
“E*Trade Considers Kicking Meme-Stock Leader Keith Gill Off Platform” (WSJ)
“Brokerages generally have wide latitude to shut down customers’ accounts at their discretion. Morgan Stanley can restrict or close a customer’s account at any time, according to E*Trade’s client agreement for self-directed accounts. When Morgan Stanley restricts or closes an account, the company may cancel all open orders and stop all services. The customer would instruct Morgan Stanley on what to do with the remaining assets.”
“Former Sustainable Fuel Startup CEO Sentenced for Embezzlement” (WSJ)
“Bryan Sherbacow was sentenced to three years in prison for transferring about $5.9 million from Alder Fuels to his own bank account and for defrauding investors through false documents”
Tweets of the Week
Until next week,
The Bear Cave