The Bear Cave #232
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Even More Problems at eXp World Holdings (EXPI)” and “Problems at Teleperformance (TEP)” and our next premium investigation comes out this Thursday, August 1.
On Friday, the SEC and Department of Justice charged Andrew Left of Citron Research with fraud and market manipulation. You can read the SEC complaint here, the DOJ indictment here, as well as commentary from Matt Levine here, and John Hempton here. The Bear Cave will be publishing our thoughts in an article soon.
New Activist Reports
“ManBearChicken” published a 27-slide presentation alleging price fixing among PVC pipe manufacturers and disclosed a short position in Atkore (NYSE: ATKR — $5.07 billion), Otter Tail (NASDAQ: OTTR — $4.20 billion), Westlake (NYSE: WLK — $18.4 billion), and Core & Main (NYSE: CNM — $10.8 billion). ManBearChicken alleged that the companies “appear to be coordinating pricing actions via an industry newsletter called OPIS” and wrote:
“We believe the apparent price fixing has resulted in massively inflated pipe prices and converter margins. These prices appear to defy economic logic, remaining at extremely elevated levels despite normalized supply chains, normalized input costs (resin), and weak demand. Today, PVC municipal and conduit pipe prices remain 4.7x and 2.7x above pre-Covid levels, respectively, according to OPIS.”
ManBearChicken said the pipe industry is ripe for collusion “because it is a commodity product produced by a consolidated group of manufacturers” and claimed the inflated prices “impacts contractors, municipalities, and ultimately consumers who pay for it in the form of higher construction costs and utility bills.”
ManBearChicken disclosed it was an “asset management firm focused on long and short equity investing” and previously alleged price fixing in the chicken industry back in a prescient 2016 article. Four years later, the Department of Justice indicted multiple companies and executives in the chicken industry for “a nationwide conspiracy to fix prices and rig bids for chicken products,” although some charges were later dismissed.
Bleecker Street Research published on Dave Inc (NASDAQ: DAVE — $445 million), a digital banking service that offers short-term cash advances. Bleecker Street alleged the company is “a predatory payday lender masquerading as a consumer-friendly fintech” and charges fees in the form of excessive “tips” from users who borrow money. Bleecker Street claimed the model would likely face regulatory scrutiny in the near future and was not sustainable or fair, often charging effective APRs for short-term cash advances of ~450% or higher.
Night Market Research also published on Dave Inc and called the company “an exploitive payday lender” and highlighted new regulations in California and New York that will reduce the fees and interest rates Dave can charge users.
Muddy Waters Research published a follow-up report on Eurofins Scientific (Paris: ERF — 10.2 billion euros), an international leader in food, product, and pharmaceutical testing. Muddy Waters raised concerns about the company’s purported cash holdings and highlighted how the company was earning about half the cash interest expected, a potential sign of fraudulent cash balances. Last month, Muddy Waters published on the company and said it was “optimized for malfeasance.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of FactSet Research Systems (NYSE: FDS — $15.8 billion) “entered into a separation agreement and general release of claims” after nearly three years.
CFO of Tenaya Therapeutics (NASDAQ: TNYA — $305 million) resigned “to pursue another opportunity” after three years. Last month, a board member and the company’s Chief Scientific Officer both departed.
CFO of Flex Ltd (NASDAQ: FLEX — $12.8 billion) “is resigning to pursue another career opportunity” after nearly four years.
CFO of Atkore Inc (NYSE: ATKR — $5.07 billion) resigned “to pursue another opportunity outside the electrical industry” after six years. The company also disclosed his “last day at the company will be August 9, 2024, and he will participate in the company's scheduled third quarter fiscal 2024 earnings call on August 6, 2024.”
Chief Commercial Officer of Rivian Automotive (NASDAQ: RIVN — $16.1 billion) resigned “to pursue other opportunities” after eleven months. Rivian’s Chief Accounting Officer also resigned this month “to pursue another opportunity.” The company’s Chief Operating Officer also departed in May and the company’s Chief Growth Officer departed in August 2023.
Chief Accounting Officer of AZZ Inc (NYSE: AZZ — $2.45 billion) “will no longer serve” effective immediately after just one year. Last month, the company’s CFO departed after three and a half years. The company is audited by Grant Thornton LLP.
Chief Human Resources Officer of Stanley Black & Decker (NYSE: SWK — $14.7 billion) was “terminated without cause” after one and a half years.
Chirantan “CJ” Desai, Chief Operating Officer of ServiceNow (NYSE: NOW — $170 billion), “came to a mutual agreement that Mr. Desai would resign from all positions with the company, effective immediately” after two and a half years. The company disclosed that it “received a complaint that raised potential compliance issues related to one of its government contracts [and] initiated an internal investigation, with the assistance of outside legal counsel, into the validity of these claims that concern the hiring of the Chief Information Officer of the U.S. Army as the company’s Head of Global Public Sector in March 2023. As a result of the investigation, the company’s Board determined that Mr. Desai and the hired individual violated company policy regarding a possible conflict relating to such individual’s hiring.” Mr. Desai also departed the board of MSCI Inc (NYSE: MSCI — $42.5 billion) just four months after joining.
Barry Diller, Chair of IAC Inc, resigned from the board of Coca-Cola (NYSE: KO — $289 billion) after 22 years. Coca-Cola is currently overseen by a 14-person board with an average tenure of nearly nine years.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“How Kamala Harris Manages Her Money: Index Funds and a 2.625% Mortgage” (WSJ)
“The couple’s portfolio, including their retirement and bank accounts, is fairly conservatively allocated, with roughly half in stocks, about one-third in cash and the rest in bonds. They hold a broadly diversified portfolio that includes several low-cost index funds.”
“Inside JD Vance’s Short-Lived Career as a Venture Capitalist” (WSJ)
“Five years, three firms, two SPAC deals and a bankruptcy are the hallmarks of his stint in the tech industry”
“When Companies Speak Out on Hot Political Issues, They Often Get It Wrong” (WSJ)
“So when businesses address hot-button political issues, what should they say? Although making an ambivalent statement might seem like the safest and least offensive option, our research highlights the risks of doing so. If companies are going to speak up, consumers are likely to react better if they take a clear position and stick with it.”
Tweets of the Week
Until Thursday,
The Bear Cave