The Bear Cave #238
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “The Five Biggest AI Losers” and “Problems at Five9 (FIVN)” and our next special investigation comes out on Thursday, September 19.
New Activist Reports
Fuzzy Panda Research published on Napco Security Technologies (NASDAQ: NSSC — $1.26 billion), a security company that makes radios, locks, and other enterprise security products. Fuzzy Panda highlighted recent accounting fraud allegations from former employees who claim Napco delayed shipments of already sold inventory to overstate net income by understating the cost of goods sold for a given quarter. Fuzzy Panda also noted the company previously restated three quarters of financial results and the company’s current Chief Accounting Officer was previously their auditor. In addition, Fuzzy Panda highlighted management has sold over $200 million in stock over the last 18 months. Fuzzy Panda concluded,
“Napco is a rare opportunity to short a high multiple boring business (9x sales!) where the growth is gone, former employees allege fraud, and investors don’t seem to know yet.”
Bleecker Street Research published on Fitell Corp (NASDAQ: FTEL — $147 million), an online fitness platform. Bleecker Street called the company “a recent Chinese pump and dump” and found the company’s largest shareholder “has undisclosed ties to a vast web of stock promotions.”
J Capital Research published on Aaron’s (NYSE: AAN — $315 million), a lease-to-own retailer in the process of being acquired by IQVentures Holdings. J Capital alleged that “regulators could slow or stop the go-private deal” because IQVentures is potentially just a front entity and the real acquirer is CCF Holdings, a competitor of Aaron’s. J Capital noted that CCF and IQVentures share the same address in legal filings and CCF is potentially motivated to obscure its involvement to avoid antitrust and CFPB scrutiny.
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of H World Group (NASDAQ: HTHT — $9.76 billion) resigned “for personal reasons” after just eight months. The Chinese hotel management has had four different CFOs and three different CEOs in the last five years. The company is audited by Deloitte Touche Tohmatsu LLP and the specific audit engagement partner for the company, Ms. Rong Yu, has audited two other public companies according to PCAOB records. Both those companies later declined ~90%.
In September 2020, Bonitas Research also published on the company and alleged the company had improper relationships with related parties and produced fake financials.
CFO of Paysafe (NYSE: PSFE — $1.30 billion) “will step down, effective immediately” after two years. The prior CFO had also left after two years and the company is down ~80% since its March 2021 SPAC merger.
CFO of RingCentral (NYSE: RNG — $2.58 billion) resigned after a little over two years “to accept a Chief Financial Officer role at a public company that is not a competitor, supplier, or customer of RingCentral.” Last year, the company’s new CEO “mutually agreed [to] separate” after just four months and was “entitled to payments totaling $9.75 million” under his separation agreement.
Vice President of Travel at CLEAR Secure (NYSE: YOU — $3.98 billion) resigned “to pursue other opportunities” after three years. The company’s Chief Information Security Officer and Chief Privacy Officer both departed earlier this year as well. In September 2021, The Bear Cave published on CLEAR and said the company “is a consistently unprofitable saturated airport concession with poor economics, worse customer reviews, and limited potential for growth.”
President of U.S. Confection at Hershey (NYSE: HSY — $40.4 billion) “is retiring to pursue other executive opportunities” after five years in his role. In March, The Bear Cave highlighted how new chocolate brand Feastables, led by YouTube star MrBeast, is taking share from Hershey. The Bear Cave concluded that “Hershey is a melting giant.”
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Idea Brunch with Nate Koppikar of Orso Partners” (Sunday’s Idea Brunch)
“Management deserves the blame when financial institutions fail, full stop. The U.S. regulatory environment is loose for a good reason – to encourage risk-taking. I often see people on Twitter hoping for a halt or a regulatory raid – draconian outcomes. Be careful what you wish for on that front. People who expect regulators to storm the offices of a public company and put a halt to a company’s activities are living in a dream world and effectively asking for the government to interfere with the capitalist process.”
“Andrew Left Case Spooks Short Sellers to Add Research Warnings” (Bloomberg)
“Short sellers are beefing up disclaimers in their research reports in the clearest signal yet that last month’s criminal charges against Andrew Left are reverberating through the industry.”
Tweets of the Week
Until next week,
The Bear Cave