The Bear Cave #227
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Globe Life (GL)” and “Problems at DeFi Technologies (DEFTF).” In observance of Independence Day, our next premium investigation comes two days early on Tuesday, July 2.
New Activist Reports
On Tuesday, newsletter publication CoinSnacks published on DeFi Technologies (OTC: DEFTF — $409 million), a holding company of crypto assets and a large crypto ETF issuer. CoinSnacks called the company “a coordinated pump built off the clout of crypto influencers” and showed how the company had a major stock price and volume boost following positive posts from influencer Anthony Pompliano and paid for promotional campaigns including $500,000 in cash and 1.5 million shares of stock to “Gold Star Media.”
On Wednesday, the company responded and said the report “lacks merit and contains numerous defamatory, selective, inaccurate, incomplete and misleading statements, speculation, and innuendo.” The company also said the report “was possibly commissioned by short-sellers” and alluded to a recent SEC action regarding balance sheet deals for activist short reports.
And on Thursday, The Bear Cave independently published on DeFi Technologies and highlighted how DeFi’s management had ties to multiple failed companies and DeFi’s registered address has also been used by multiple early-stage gold mine, cannabis, and electric vehicle tech companies that later fell significantly.
DeFi stock fell ~30% this week but remains up ~1,500% over the last twelve months.
Viceroy Research published multiple updates on Arbor Realty Trust (NYSE: ABR — $2.66 billion), a mortgage REIT focused on bridge financing. Viceroy alleged that “Arbor’s borrowers are almost exclusively distressed” and said, “Arbor’s earnings quality and asset efficiency have deteriorated sharply since mid-2022.” In particular, Viceroy highlighted a recent foreclosure at Northbrooke Apartments which had poor online reviews for issues like cockroaches and flooded apartments that Viceroy believes will lead to a $7 million shortfall on Arbor’s Northbrooke debt. Viceroy concluded,
“There is no rate cut large enough, no rate caps cheap enough, and no investors dumb enough to save Arbor.”
Recent Resignations
Notable executive departures disclosed in the past week include:
Division Chief Executive Officer of Bed Bath & Beyond at Beyond Inc (NYSE: BYON — $613 million) “ceased” her employment after just four months. Before joining Beyond, she was previously the CEO of Conn’s.
CFO of JELD-WEN Holding (NYSE: JELD — $1.15 billion) resigned “to pursue other personal and professional interests” after two years. The company has had three different CEOs, three different CFOs, and three different board chairs in the last five years.
CFO of Heidrick & Struggles International (NASDAQ: HSII — $691 million) resigned “to pursue other opportunities” after six years. The company’s CEO was also replaced in January with an outsider. Alta Fox Capital previously criticized the company’s leadership and capital allocation.
Chief Legal Officer of Aspen Technology (NASDAQ: AZPN — $12.6 billion) resigned after one and a half years following “a personal decision to pursue another opportunity.” In May, the company’s board chair, Jill Smith, resigned “effective immediately, for personal reasons” after nearly three years. Ms. Smith continues to serve on two other boards. In addition, last October the company’s CFO resigned after nearly three years “to pursue another opportunity.”
Data for this section is provided by VerityData from VerityPlatform.com
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What to Read
Raging Capital Ventures Interview with Ken Traub (Read it here)
“Shortly after I started the job as President, it became clear to me that the mistakes I and D&T had found in the financial statements were no accident, but was part of a deliberate, multi-faceted fraud. But worse yet, I discovered abundant evidence that the fraud was directed and overseen by my new boss, the Chairman/CEO. I presented my findings to the independent directors and discovered that there was one primary credential for board membership at this company and that was loyalty to a CEO that I now believe directed a massive fraud. I fought with the board, and with the assistance of Chase and the DOJ and SEC, I forced all of the directors that were aligned with the CEO to resign and I fired my boss. I then became the CEO.”
“This Judge Made Houston the Top Bankruptcy Court. Then He Helped His Girlfriend Cash In.” (WSJ)
“The letter alleged that U.S. Bankruptcy Judge David R. Jones, chief of the bankruptcy court in Houston, was in a romantic relationship with Elizabeth Freeman, a Texas attorney who as Kirkland’s co-counsel helped the firm shepherd multibillion-dollar cases in Jones’s courtroom.”
“Chairman of Publicly Traded Health Care Company Convicted of Insider Trading” (DOJ)
“According to court documents and evidence presented at trial, Terren S. Peizer, 64, a resident of Santa Monica, California, and Puerto Rico, avoided more than $12.5 million in losses by entering into two Rule 10b5-1 trading plans while in possession of material non-public information concerning the serious risk that Ontrak’s then-largest customer would terminate its contract… In August 2021, Peizer entered into his second Rule 10b5-1 trading plan approximately five minutes after Ontrak’s chief negotiator for the contract informed Peizer that the contract likely would be terminated.”
Tweets of the Week
If you enjoy our Tweets of the Week, you’ll love our sister site CoolStockTweets.com. Every week Cool Stock Tweets highlights 10-15 long-biased stock pitches. It takes just two minutes to skim, is perfect for off-the-beaten-path long idea generation, and is completely free. Join 1,000+ investors here.
Until next week,
The Bear Cave