The Bear Cave #226
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 this Thursday, June 20.
New Activist Reports
Culper Research published on Axsome Therapeutics (NASDAQ: AXSM — $3.50 billion), a drugmaker targeting central nervous system conditions like depression and Alzheimer’s. Culper alleged the launch of the company’s major depressive disorder drug, Auvelity, was “aided by undisclosed consignment deals with dodgy mail-order pharmacies” which inflated the company’s revenue. Culper noted that the company “has simply not been paid for 43% of its reported Auvelity revenues since launch” and dismissed its auditor, Ernst & Young, in 2023. Culper also raised concerns about Auvelity’s formulation and price, writing,
“Axsome is run out of the 22nd floor of One World Trade by CEO Herriot Tabuteau, a career-long banker whose business now rests on the idea of combining two generic drugs into one, then selling that drug at a 30x markup. Axsome isn't focused on patients, but profiteering.”
Viceroy Research published a follow-up report on Globe Life (NYSE: GL — $7.19 billion), a supplemental insurance company that operates through a network of independent salespeople. Viceroy said the company’s recent disclosure of a regulatory inquiry concerning “a web portal that likely resulted in unauthorized access to certain consumer and policyholder information” was sparked by Viceroy flagging the problems to regulators. Viceroy found that “Protected Health Information records of Globe Life’s clients are freely accessible via online portals with universal login credentials distributed by agents across the web.”
Last week, The Bear Cave also published on a host of ethical problems at Globe Life and concluded that “Globe Life is morally bankrupt and financially uninvestable.”
Hunterbrook Media, a new media outlet that shares its stories in advance with an affiliated hedge fund, published on Arcadium Lithium (NYSE: ALTM — $3.72 billion), a global lithium miner. Hunterbrook said the company’s “enormous water draw is depleting dwindling supplies for communities in Argentina and their revered ecosystems” and is creating a host of environmental and legal problems for nearby communities.
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Array Technologies (NASDAQ: ARRY — $1.88 billion) “will be stepping down from his position at the end of the second quarter to pursue other business interests” after just eight months. In November, the company’s prior CFO “separated” from the company after four and a half years. In April 2023, the company switched auditors from BDO LLP to Deloitte and in September 2022 Jehoshaphat Research criticized the company for its “bill-and-hold revenue recognition policy in which a company books revenue on product that is still sitting in the seller’s possession, or even in a third party supplier’s warehouse.” In October 2022, the company’s Chief Operating Officer also departed after just one year.
CFO of Tyson Foods (NYSE: TSN — $19.2 billion), John R. Tyson, was “suspended from his duties effective immediately” after nearly two years following his arrest by University of Arkansas police while driving with a blood alcohol level of 0.191, more than twice the legal limit of 0.08. In November 2022, Mr. Tyson was also arrested just two months into the job “for criminal trespass and public intoxication.” According to the Wall Street Journal, Mr. Tyson also “had two prior alcohol-related arrests in 2010 during his college years.” Mr. Tyson is the son of the company’s chairman, the great-grandson of the company’s founder, and was the youngest S&P 500 CFO when he was appointed at the age of 32.
CFO of Evergy (NASDAQ: EVRG — $12.1 billion) departed to become CFO at Consolidated Edison (NYSE: ED — $31.4 billion) after a little over three years.
CFO of TriplePoint Venture Growth BDC (NYSE: TPVG — $341 million), 59 years old, “plans to retire” after five years. In May 2023, The Bear Cave published on TriplePoint and said the BDC “is encumbered by high fees, weak management, and a weaker loan book saddled by portfolio company bankruptcies and upside-down startups.”
CFO of Middlesex Water Co (NASDAQ: MSEX — $914 million), 65 years old, “retired, effective June 24, 2024” after 28 years. The company is down ~40% in the last year and is audited by Baker Tilly US, LLP.
President of Corrugated Packing at WestRock Co (NYSE: WRK — $12.8 billion) resigned “to pursue other career opportunities” after two years. The company’s prior President of Corrugated Packing also resigned after just a little over one year “to pursue other interests.”
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“SEC Charges Investment Advisers with Misleading Disclosures Regarding Work with Activist Short Publishers” (SEC)
“In addition, according to the SEC's order, in September and October 2018, Anson Advisors agreed to pay the principal of a short activist firm a share of the fund's trading profits in connection with bearish reports and tweets on two securities. As a result of the fund's trading, the short activist's share of the trading profits exceeded $1.1 million. Instead of paying this amount directly to the short activist, Anson Advisors and Anson Funds paid through a third-party intermediary via invoices for purported research services that the third-party intermediary had not performed.”
“Anson Funds Settles With SEC in Long-Running Short Seller Probe” (Institutional Investor)
“More than three years after the government began its exhaustive probe of short sellers, the Securities and Exchange Commission has finally managed to charge someone: Anson Funds, a $2.5 billion hedge fund, which reached a $2.25 million settlement with the SEC over the fund’s alleged failure to tell its investors about its balance sheet arrangement with an activist short seller… ‘The implication of this action is that the SEC sees no problem with balance sheet arrangements under which funds pay activist short sellers for advance copies of reports,’ said one short seller.
The minor nature of the infraction and the small size of the settlement was far from the grand hype that surrounded the investigation, which was said to involve dozens of short sellers, and numerous companies, including some blue-chip names.”
Tweets of the Week
Until Thursday,
The Bear Cave