The Bear Cave #258
New Activist Reports, Recent Resignations, and Tweets of the Week
Welcome to The Bear Cave! Our last premium articles were “Even More Problems at B. Riley (RILY)” and “Problems at Signet Jewelers (SIG)” and our next special investigation comes out Thursday, February 6.
New Activist Reports
Independent researcher Lauren Balik published a new article on AppLovin (NASDAQ: APP — $122 billion), a mobile app monetization company. Ms. Balik alleged the company “leaned into goosing their revenues through gimmicks, gift card schemes, and misdirection.” Ms. Balik showed that some websites offered gift cards to users who downloaded and played AppLovin-affiliated games and engaged with the gameplay ads. Ms. Balik also showed that the AppLovin-enabled ads were often unreadable or misformatted.
Spruce Point Capital published on Construction Partners (NASDAQ: ROAD — $4.72 billion), a road construction company. Spruce Point said the company is facing “increased pressures resulting in organic revenue growth failure.” Spruce Point filed a FOIA request with the Florida Department of Transportation, the company’s largest customer, and found “an apparent -22% decline in contract awards in 2024, none of which appears to be captured in the market consensus.” Spruce Point concluded the company has “35% - 50% potential long-term downside.”
Hunterbrook Media published on RH (NYSE: RH — $7.79 billion), a luxury home furnishings retailer. Hunterbrook raised concerns about RH’s liquidity and wrote,
“The luxury brand has seen its cash position fall from $2.3 billion to just $42 million — after acquiring two private jets, a yacht, and what’s been called a ‘personal penthouse’ for the CEO; borrowing $2.5 billion at variable rates just as they began rising in 2022, sending annual interest payments soaring from $81 million to $211 million; spending $2.3 billion on stock buybacks while RH’s CEO sold $740 million of his own shares; splurging on a European expansion that seems to be a complete flop; spending 9-figures on a perpetually delayed Aspen complex; and failing to move through meaningful inventory despite widespread discounts.”
Hunterbrook gathered satellite data of RH warehouses to support its view of growing inventory. Hunterbrook’s co-founder, Sam Koppelman, also highlighted that RH insiders sold stock after being approached for comment about the Hunterbrook story.
Two accounts on X, @unemon1 and @pennycheck, highlighted screenshots from the Hindenburg Research website showing Hindenburg uploaded around 20 images of alleged misconduct concerning XP Inc (NASDAQ: XP — $6.88 billion), a Brazilian financial services company. The publicly available images were uploaded in early January 2025, before Hindenburg disbanded, but were taken down after circulating on X on January 21.
The Bear Cave previously published on XP in August 2023 and raised concerns about “infuriated brokers, a broken sales culture, and meddling management among the company’s many problems.”
Recent Resignations
Notable executive departures disclosed in the past week include:
CEO of Blue Bird Corp (NASDAQ: BLBD — $1.21 billion) “will resign on February 16, 2025” after nearly two years and remain on the board. The school bus manufacturing company has had eight board departures in the last two years.
CFO of Lanzatech Global (NASDAQ: LNZA — $228 million) resigned “effective immediately” after four and a half years. The carbon capture company is down ~90% since its February 2023 SPAC merger.
Data for this section is provided by VerityData from VerityPlatform.com
News of the Week
New SEC B7A Exemptions
This week, the SEC publicly released its December 2024 FOIA Logs. The FOIA Logs are publicly accessible Excel files with copies of all the FOIA requests the SEC received that month (~1,000) and all requests met with a B7A exemption (~20). A B7A exemption “authorizes the withholding of records or information compiled for law enforcement [that]… could reasonably be expected to interfere with enforcement proceedings.” Many investors interpret a B7A exemption to mean the target company is under an undisclosed SEC investigation.
Companies on the December 2024 B7A exemption list include Innodata (NASDAQ: INOD — $1.17 billion), PACS Group (NYSE: PACS — $2.21 billion), and Elanco Animal Health (NYSE: ELAN — $5.97 billion), among others. Two large filers of the FOIA requests are Canary Data and Disclosure Insight.
New Hedge Fund Letters
View new hedge fund investor letters from Bronte Capital, Greenlight Capital, and other funds on this publicly available Reddit page. Bronte Capital wrote that it is looking to hire former investigative journalists to help run its short book. Bronte wrote, in part,
“Bronte Capital runs a large diversified short book. We are betting that hundreds of companies (globally) will either fail or disappoint so much that the stock drops 90 plus percent.
We often do this by following suspect people.
If for example you worked at a suspect broker (like Stratton Oakmont in the Wolf of Wall Street), and later worked for a gold mining company which claimed to have a large deposit that was never mined, and now you are the CFO of a biotech company we probably want to short that biotech company without even attempting to understand the science.
This has worked well – but as we have expanded the database of bad people we have found (and lost money on) on several false positive indicators. This year has been less successful. We are looking for people who will help us with the work of monitoring and reviewing literally hundreds of short positions.”
“Sezzle Removes Merchants Following The Bear Cave’s Investigation” (The Bear Cave)
“Without credit card processing enabled by Sezzle, these unauthorized online pharmacies will lose much of their reach to American consumers. By shining a light on these practices, The Bear Cave and its readership have reduced the fraud, waste, abuse, and adverse events caused by these illegal online pharmacies.”
Tweets of the Week
Until next week,
The Bear Cave