The Bear Cave #249
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Problems at Viasat (VSAT)” and “Problems at TransDigm (TDG)” and our next special investigation comes out Thursday, December 5.
New Activist Reports
Hunterbrook Media published on Roblox (NYSE: RBLX — $32.4 billion), a popular gaming platform for children. Based on records obtained through the Freedom of Information Act, Hunterbrook alleged the company faces undisclosed probes from both the SEC and FTC. Hunterbrook estimated the SEC probe into Roblox began recently and said its FOIA requests were made using startup Canary Data.
Kerrisdale Capital published on Oklo (NYSE: OKLO — $3.08 billion), a nuclear energy company. Kerrisdale alleged that the company’s “claimed unit economics are nonsensical, its management are academics with weak real-world commercialization experience, its tech/engineering team dramatically trails peers and its projected timelines are laughable.” Kerrisdale concluded that with “hype over nuclear powered AI datacenters at fever pitch, a parabolic rise in share price and years of cash burn before any revenue let alone profit, dilutive capital raises are likely.”
Oklo is up ~150% since its May 2024 merger with a Sam Altman-led SPAC.
Muddy Waters Research published on elf Beauty (NYSE: ELF— $7.12 billion), a popular makeup and skincare company. Muddy Waters said it believes elf is “overstating revenue, profits, inventory” and cited that “elf’s imports crashed by ~2/3 and haven’t recovered, yet sales in the US have defied this trend.” Muddy Waters estimated that elf overstated revenue by “~$135 million-$190 million.”
In response, elf said the allegations were “without merit” and wrote,
“In early 2024, for competitive reasons and as permitted by applicable regulations, we filed a request for confidentiality with U.S. Customs and Border Protection with respect to our customs import data. Therefore, import data available to the public after February 6, 2024, does not include a substantial majority of our actual U.S. imports.”
Grizzly Research published on SharkNinja (NYSE: SN — $13.8 billion), a household appliances company. Grizzly Research alleged that the company’s “Chinese Chairman and controlling shareholder, Xuning Wang, is taking advantage of the company to the detriment of public shareholders” and further alleged the company was “secretly transferring critical assets to an entity controlled by insiders for a nominal consideration.” Grizzly Research also highlighted the company “recently appointed the 28-year-old son of the controlling shareholder to the board” and faces the possibility of tariffs on its Chinese imports under the Trump Administration.
Citron Research tweeted critically on MicroStrategy (NASDAQ: MSTR — $85.5 billion), a business software company better known for its large Bitcoin holdings. Citron wrote that “with Bitcoin investing easier than ever (ETFs, COIN, HOOD), MSTR’s volume has completely detached from BTC fundamentals. While Citron remains bullish on Bitcoin, we’ve hedged with a short MSTR position.” Four years ago, Citron published positively on MicroStrategy based on its Bitcoin accumulation strategy. The stock is up ~15x since then.
Independent researcher Lauren Balik published another article on Zeta Global Holdings (NYSE: ZETA — $5.27 billion), a data and marketing automation company. Ms. Balik called the company “an almost complete scam” and provided an example of a Zeta subsidiary apparently operating a “consent farm” website to obtain consumer information under misleading pretenses.
Two weeks ago, Culper Research also published on Zeta and alleged Zeta operates dozens of deceptive websites designed to obtain consumer info and engages in revenue round-tripping schemes.
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Evolv Technologies (NASDAQ: EVLV — $487 million) resigned after two and a half years and “will not receive any severance payments or benefits in connection with his departure.” Last month, the company’s CEO was “terminated without cause, effective immediately” and the company’s board “commenced an investigation of the company’s sales practices, including whether certain sales… were subject to extra-contractual terms and conditions that impacted revenue recognition.” The company is down ~70% since its July 2021 SPAC merger.
CEO of Quaker Chemical Corp (NYSW: KWR — $2.94 billion) departed in “an involuntary termination without cause” after three years and also departed the board. The company has had five different CFOs in the last ten years.
CFO of APi Group (NYSE: APG — $10.2 billion) resigned “to pursue another professional opportunity” after three years. In July 2022, the company’s General Counsel departed “to pursue other opportunities” after two and a half years and in March 2022 the company’s Chief Accounting Officer resigned after just eleven months.
CEO of Microchip Technology (NASDAQ: MCHP — $35.8 billion) “retired” effective immediately after nearly four years and also resigned from the board.
CEO of First Foundation Inc (NYSE: FFWM — $661 million) “retired effective immediately” after 17 years and also departed the board. The bank has had five different CFOs in the last five years and is audited by Eide Bailly LLP. In July, the bank sold preferred stock to outside investors to help reduce the risk of its “heavy commercial real-estate exposure.”
CEO and Board Chair of Liberty Energy (NYSE: LBRT — $3.10 billion), Christopher A. Wright, was “nominated by President-elect Donald J. Trump for the position of U.S. Secretary of Energy” and will resign upon confirmation by the U.S. Senate. Mr. Wright also serves on the board of nuclear energy company Oklo (NYSE: OKLO).
CEO and Board Chair of BGC Group (NASDAQ: BGC — $4.65 billion), Howard W. Lutnick, “has been nominated by President Donald J. Trump to serve as the U.S. Secretary of Commerce and the intention of Mr. Lutnick is to step down from his positions with the company effective upon U.S. Senate confirmation” after nearly 25 years. Mr. Lutnick is also Board Chair of Newmark Group (NASDAQ: NMRK) and a board member of Satellogic (NASDAQ: SATL).
Chief Operating Officer of ACADIA Pharmaceuticals (NASDAQ: ACAD — $2.72 billion) was “involuntarily terminated without cause” after three years. In September, the company’s CEO was “involuntarily terminated without cause” after nine years and also departed the board. In January, the company’s General Counsel resigned “to pursue other opportunities” and in November 2023 the company’s Head of Research and Development departed after just eleven months “to pursue other opportunities.” In February 2024, Culper Research called the company’s main drug “a total flop” and raised issues with how the company presented its efficacy data.
Data for this section is provided by VerityData from VerityPlatform.com
What to Read
“Former Senior Manager of Federal Reserve Bank of Richmond Pleads Guilty to Insider Trading and Making False Statements” (DOJ)
“Robert Brian Thompson, 43, of Mosley, worked as a bank examiner… From October 2020 through February 2024, Thompson misappropriated confidential information, including [confidential supervisory information], to execute trades in publicly traded financial institutions. In total, Thompson executed 69 trades in seven different publicly traded financial institutions for a total of approximately $771,678 in personal profits.”
“Roblox Adds Parental Controls After Claims It Compromises Child Safety” (WSJ)
“The safeguards Roblox is adding include the ability for parents to create their own accounts that link to their children’s accounts, allowing them to set daily usage limits, block access to specific game genres and more.”
Tweets of the Week
Until next week,
The Bear Cave