The Bear Cave #228 + Mid-Year Review
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 out two days early on Tuesday, July 2.
New Activist Reports
Muddy Waters Research published a 36-page report on Eurofins Scientific (Paris: ERF — 8.91 billion euros), an international leader in food, product, and pharmaceutical testing. Muddy Waters said the company is “optimized for malfeasance” and “has a parasitic controlling shareholder who’s siphoned money for two decades.” For example, when Eurofins acquires businesses its controlling shareholder often separately acquires the underlying real estate and then leases it back to Eurofins at above-market rates, according to former employees. Muddy Waters also found the company has “a confusing accounting for cash at its subsidiaries,” has oddly done increasingly smaller acquisitions as it has supposedly grown, and is an industry outlier with revenue per employee about 60% higher than peers.
Wolfpack Research published on MediaAlpha (NYSE: MAX — $864 million), a marketing technology company. Wolfpack alleged that MediaAlpha uses deceptive ads and websites to solicit consumer contact info that the company then resells to alleged scammers. Wolfpack showed examples of misleading ads for “Bidencare Health Plans” and non-existent government stimulus programs. In addition, Wolfpack highlighted that the FTC is investigating the company and wrote,
“Management’s apparent lack of concern over the investigation is belied by their actions. Top executives have dumped stock, switched base compensation to straight cash, and rewritten the articles of incorporation to shield them from liability for breaches of fiduciary duty.”
MediaAlpha stock fell ~20% this week following Wolfpack’s report.
Hunterbrook Media, a new media outlet that shares its stories in advance with an affiliated hedge fund, published on Hims & Hers Health (NYSE: HIMS -- $4.67 billion), a telehealth platform “focused on providing modern personalized health and wellness experiences to consumers.” Hunterbrook alleged that Hims “sells knockoff GLP-1 weight loss drugs through a loophole that could end at any time” and “relies on a sole GLP-1 supplier with previously unreported ties to fraud and bankruptcy.” Hunterbrook also raised concerns that Hims was not adequately screening patients before dispensing medication.
Viceroy Research published a follow-up report on Globe Life (NYSE: GL — $7.68 billion), a supplemental life insurance company that operates through a network of independent salespeople. Viceroy wrote that on June 20 the SEC’s FOIA office denied Viceroy’s appeal for documents related to Globe Life “on the basis that Globe Life is under formal, active and ongoing investigation by the SEC’s Division of Enforcement.” Viceroy also added,
“The problems for Globe Life will not go away, no matter how much management pretends that they do not exist. We delayed the publication of this document to see if the company would make any disclosure whatsoever to inform the market of these developments: they did not.”
Earlier this month, The Bear Cave also published on Globe Life and said the company “is morally bankrupt and financially uninvestable.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO of Centuri Holdings (NYSE: CTRI — $2.04 billion) “will be stepping down” to take the CEO role at American Electric Power (NASDAQ: AEP — $45.7 billion) just three months after Centuri was spun off from Southwest Gas Holdings.
CFO of Capital Bancorp (NASDAQ: CBNK — $283 million) resigned after one year “due to personal reasons.”
CFO of Owens & Minor (NYSE: OMI — $1.10 billion) resigned “at the request of the company” effective immediately after nearly two years. The company has had six different CFOs and five different CEOs in the last ten years.
CFO of Medtronic (NYSE: MDT — $101 billion) resigned after eight years “to accept the role of CFO for HP Inc (NYSE: HPQ — $34.6 billion).”
Chief Operating Officer of Mister Car Wash (NYSE: MCW — $2.25 billion) resigned after a little over two years. The company is down ~65% since its June 2021 IPO.
Data for this section is provided by VerityData from VerityPlatform.com
Mid-Year Review
The Bear Cave has published articles on thirteen companies this year:
Problems at Chegg (CHGG), January 4, which has since fallen ~72%
Problems at Klaviyo (KVYO), January 18, which has fallen ~3%
Problems at a Billion Dollar Mess, February 1, which covered B. Riley (RILY), now down ~25%, and Applied Digital (APLD), which has risen 16%
More Problems at B. Riley (RILY), February 15, our follow-up article on B. Riley
Problems at Archer Aviation (ACHR), March 7, which has fallen ~17%
More Problems at Hershey (HSY), March 21, which has fallen ~7%
Problems at Marqeta (MQ), April 4, which has fallen ~9%
Problems at Primerica (PRI), April 18, which is up about 12%
More Problems at eXp World Holdings (EXPI), May 1, which is up about 13%
Problems at AMC Entertainment (AMC), May 16, which has fallen ~9%
More Problems at RCI Hospitality Holdings (RICK), May 30, which has fallen ~5%
Problems at Globe Life (GL), June 6, which has fallen ~2%
Problems at DeFi Technologies (DEFTF), June 20, which has fallen ~22%
On average, the companies profiled have declined 9.9% since publication compared to a 15.5% increase for the S&P 500 year to date. As always, The Bear Cave is very grateful for every paid reader.
Our first article this year, Problems at Chegg, has seen the greatest decline largely as AI-powered competition took share as The Bear Cave predicted.
This Tuesday at 10:30am ET, The Bear Cave will publish on another multi-billion-dollar company with imminent AI risks the market is missing. See you soon.
What to Read
Greenlight Capital complaint against James Fishback (Full Complaint)
“Fishback continued his campaign to harass and intimidate Greenlight by threatening to attend and disrupt Greenlight’s 2024 Annual Partner Dinner, which is attended by a large number of Greenlight’s investors, counterparties and service providers. After being told that he would not be allowed to attend the event, Fishback threatened to stand outside the event and hand out letters to the attendees, including Greenlight’s investors. The letters that he threatened to hand out contained Greenlight Confidential Information and strategies, maliciously and disingenuously called into question Greenlight’s macro investing abilities, and prompted investors to ask a series of pointed questions to Mr. Einhorn at the event. Fishback threatened to do this to embarrass and intimidate Greenlight and interfere with Greenlight’s relationship with its investors. After receiving multiple warnings from Greenlight and its counsel as to the wrongful nature of his threats, Fishback ultimately did not attend the event. But he made no secret of his ongoing desire to harm Greenlight.”
“The Trial of Archegos’s Bill Hwang Could Hang on GSX Trades” (Institutional Investor)
“By the end of July 2020, Hwang had more than $1 billion in exposure to GSX, according to the government. At that time, the stock was near $100 per share, after having fallen below $30 on the Muddy Waters report in May. GSX went on to trade as high as $141 per share in August, and additional purchases by Hwang continued to prop it up. The stock — which changed its name to Gaotu Techedu after the Archegos implosion — now trades at about $5.
GSX wasn’t the most famous of Archegos’s stocks, but it was one of the firm’s biggest bets. Hwang controlled some 75 percent of the shares, according to Tomita’s testimony. ‘The fund had cornered the market,’ he said, according to a Bloomberg liveblog of the proceedings.”
Tweets of the Week
Until Tuesday,
The Bear Cave