The Bear Cave #247

New Activist Reports, Recent Resignations, and Tweets of the Week

Nov 10, 2024

Welcome to The Bear Cave! Our last premium articles were “Problems at Roblox (RBLX) #5” and “Problems at Viasat (VSAT)” and our next special investigation comes out Thursday, November 21. In addition, The Bear Cave recently had the pleasure of going on the Stansberry Investor Hour podcast. Listen here.

New Activist Reports

Hindenburg Research published on PACS Group (NYSE: PACS — $3.31 billion), a Utah-based nursing facilities company. Hindenburg’s investigation, which included “interviews with 18 former employees, competitors, and an analysis of 900+ detailed facility-level cost reports,” found that PACS billed Medicare at excessive rates for patients potentially exposed to COVID. Hindenburg highlighted that PACS “booked 188% more Medicare skilled care revenue than [a competitor] on a per bed basis” and noted that the company’s two co-founders “paid themselves $194.5 million in dividends prior to the April 2024 IPO and have sold $656.5 million in stock since.”

Hindenburg concluded that “if PACS is forced to curtail its many ongoing billing and staffing schemes, we believe it will be revealed for what it is: an unprofitable roll-up of distressed SNFs with no path to legitimate profitability under the current profoundly corrupt leadership.”

PACS Group stock fell ~45% this week following the Hindenburg report.

Bleecker Street Research published on Gevo (NASDAQ: GEVO — $381 million), a Colorado-based sustainable aviation fuel company. Bleecker Street alleged the company “gave investors false security about its conditional loan commitment from the Department of Energy” and suggested the incoming Trump Administration is less likely to fund the proposed $1.46 billion loan. Bleecker Street also said the company “consistently failed to meet expectations since its 2010 IPO” and “has been long on hope and short on actual results.”

Iceberg Research also published a series of critical tweets on Gevo and concluded, “the shifting political landscape and challenging economics make Gevo’s renewable project highly speculative and prone to failure.”

Recent Resignations

Notable executive departures disclosed in the past week include:

Both Co-CEOs of Sprinklr (NYSE: CXM — $1.92 billion) “mutually agreed” to depart after five months and fifteen years, respectively; they were replaced by an outside candidate who was previously CEO of Vonage. In February, the company’s Chief Revenue Officer “stepped down” after a little over one year. The company is down ~65% since its June 2021 IPO.
CFO of Openlane (NYSE: KAR — $2.11 billion), formerly KAR Auction Services, “will resign from the company effective March 1, 2025 to pursue another opportunity closer to family” after two years.
CEO of Sun Communities (NYSE: SUI — $15.6 billion) “has informed the board of his intention to retire in 2025” after 32 years and the board has “established a CEO Succession Planning Committee.” In September 2024, Blue Orca Capital called the company “a mess of egregious executive behavior” and found that Sun’s CEO “received an undisclosed $4 million loan from the family of a supposedly independent Director who sits on the Audit Committee” and also separately “admitted borrowing $700K from a director whose law firm also serves as [Sun’s] general counsel.”
Chief Operating Officer of DXC Technology (NYSE: DXC — $3.92 billion) “will be exiting the company” after nearly two years. The company’s General Counsel also departed in March and the company’s former CEO stepped down in December 2023.
Chief Commercial Officer of QuidelOrtho Corp (NASDAQ: QDEL — $2.94 billion) was “terminated” after two and a half years along with the company’s Chief Operating Officer who was “terminated” after four years. In February, the company’s CEO was also “terminated” after fifteen years.
Chief Accounting Officer of Hippo Holdings (NYSE: HIPO — $701 million) “entered into a separation agreement” after a little over three years. In October, the company’s Chief Revenue Officer also departed after four years. In March 2023, the company replaced Ernst & Young as its auditor with Deloitte. The home insurance company is up about 200% this year and down ~90% since its August 2021 SPAC merger.

Data for this section is provided by VerityData from VerityPlatform.com

What to Read

“Before She Quit, Jane Lauder Called for Cousin’s Ouster at Estée Lauder” (WSJ)

“In early September, some board members at Estée Lauder received a private letter calling for a shake-up: Longtime executive chairman William Lauder was destroying the company and needed to go. The message wasn’t sent by an activist investor in the struggling beauty giant. It came from another member of the founding family: William’s cousin and fellow board member, Jane Lauder.”

“Trump’s New Wall Street Watchdogs Are Coming—Likely With a Lot Less Bite” (WSJ)

“President-elect has said he would fire SEC Chair Gary Gensler on day one.”

“Simple Yet Powerful Tips for Short Selling – Exposing the Red Flags” (Stansberry Investor Hour)

“On this week’s Stansberry Investor Hour, Dan and Corey welcome Edwin Dorsey to the show. Edwin conducts deep, investigative analyses of public companies in his newsletter, The Bear Cave. By prioritizing customer relations and common-sense logic over financial data, he can gain an edge and find troubled companies before Wall Street does.”