🐻The Bear Cave #35🐻
8 New Activist Reports, Interesting SEC Enforcement Actions, Tweets of the Week
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New Activist Reports
Citron Research published a long thesis on mental health company COMPASS Pathways (NASDAQ: CMPS — $1.20 billion). Citron highlighted that the company’s “management, advisory board, and investors are beyond noteworthy” and wrote,
“It’s not often you see concept stocks come to market. With a clear first mover advantage, CMPS is the most well-funded psychedelic drug company in the world and the only way to play the psychedelic renaissance of 2020.”
Citron Research also promised to publish a long recommendation on the African e-commerce company Jumia Technologies (NYSE: JMIA — $812 million) later this week. This contrasts with Citron’s negative report on the company published last year.
Night Market Research published on FuelCell Energy (NASDAQ: FCEL — $758 million). Night Market highlighted incomplete disclosures, regulatory changes, and apparent contract cancellations at the company. FuelCell stock up over 700% over last year.
Fuzzy Panda Research published on electric vehicle company Workhorse Group (NASDAQ: WKHS — $2.81 billion). The report alleged mechanical issues in Workhorse trucks and questioned whether the company would receive major orders.
The Capitolist published on refrigerator manufacturer CryoPort (NASDAQ: CYRX — $1.90 billion). The Capitolist highlighted a questionable moat, recent acquisitions, a deteriorating balance sheet, and a potentially misleading share count. CryoPort stock is up 250% in the last year on hopes the company will benefit from coronavirus vaccine distribution efforts. The Capitolist also published on CryoPort in 2019.
White Diamond Research published on CleanSpark (NASDAQ: CLSK — $187 million). White Diamond highlighted litigation with the company’s largest shareholder, promotional press releases, and consistent losses at the Utah-based energy management software company. CleanSpark stock is up 500% in the last six months.
Grizzly Research published on Celsius Holdings (NASDAQ: CELH — $1.57 billion). Grizzly Research said it did not trust the company’s growth figures and alleged potential for channel stuffing or sales manipulation. The Bear Cave, which is unaffiliated with Grizzly Research, previously published on problems at Celsius Holdings.
J Cap Research published a very interesting report on ACM Research (NASDAQ: ACMR — $1.36 billion), a semiconductor tech company that operates primarily in China. J Cap Research questioned the legitimacy of the company’s cash balances, alleged inconsistencies in company contracts, and claimed, “The team around ACMR is better known for stock promotion than for management.” J Cap also highlighted ACMR’s industry-beating gross margins and claimed the company was inflating revenue and profit.
ACMR’s auditor is BDO China and the specific audit partner responsible for ACMR is Daniel Ho. According to PCAOB records, Mr. Ho’s other public audit clients all have market caps below $100 million.
In an SEC comment letter to ACMR in 2019, the SEC wrote “We note that your Form 10-K does not include the required certifications [by company officers].”
The company claimed the certifications were not included “due to a financial printer’s error.”
ACMR stock up over 1,000% since going public in 2017.
Interesting SEC Enforcement Actions
“SEC Charges Seismic Data Company, Former Executives with $100 Million Accounting Fraud” (Link)
The SEC charged SAExploration Holdings Inc. “for a multi-year accounting fraud that falsely inflated the company's revenue by approximately $100 million.” SAExploration entered into a series of undisclosed related-party transactions totaling $140 million. In addition, “to create the false impression that the [related-party] company was actually paying SAE for seismic data, [executives] misappropriated nearly $6 million from SAE and used the funds for a series of round trip transactions that caused the money to be sent back to SAE.”
“SEC Charges Four Individuals in a Fraudulent Manipulation and Kickback Scheme” (Link)
Four penny stock manipulators allegedly paid kickbacks to a stock promoter “to purchase large volumes of the companies' stock through pre-arranged matched orders in order to create an illusion of genuine investor demand.” The stock promoter was actually an undercover FBI agent.
“SEC Charges John McAfee with Fraudulently Touting ICOs” (Link)
“McAfee promoted multiple ICOs on Twitter, allegedly pretending to be impartial and independent even though he was paid more than $23 million in digital assets for the promotions. When certain investors asked whether he was paid to promote the ICOs, McAfee allegedly denied receiving any compensation from the issuers.”
“SEC Charges Silicon Valley Venture Capital Fund Adviser with Misappropriating Fund Assets” (Link)
Alexander Gould, a Stanford Economics lecturer, ran a private venture capital fund, “Goulden Boy LLC” and allegedly misappropriated over half the fund “to repay a debt that he owed to another fund he had managed and to pay for other personal expenses, including travel.”
“SEC Charges Amazon Finance Manager and Family with Insider Trading” (Link)
A senior manager at Amazon’s finance department allegedly tipped her husband about Amazon’s financial performance. The family “traded on this confidential information in eleven separate accounts maintained by different members of the family.” In total, the family reaped about approximately $1.4 million from their unlawful trading in Amazon securities.
Bear Cave Premium
The Bear Cave now offers premium subscriptions. For $34/month you will receive two investigative reports every month focusing on auditor issues, disclosure issues, SEC comment letters, accounting issues, changes in revenue recognition, public litigation, executive turnover, business model issues, and complaints obtained through FOIA requests.
The reports will generally cover U.S. companies with market caps between $500 million and $10 billion. You can read the first premium report here. The next report comes out on Thursday, October 15th, and exposes a $1 billion+ U.S. company.
In Case You Missed It
(Sponsored) Last week's webinar "The Analyst + Sentieo: Best Practices in Shorting Research," is now available on-demand. In it, Sentieo and the Analyst discuss The Analyst's SELL rating on NMC Health and research strategies for potential ideas. View the recording here.
If your firm is interested in advertising events, financial services, or job openings to 4,000+ analysts, short-sellers, and bankers, please email edwin@585research.com
What to Read
“Meet the Customer Service Reps for Disney and Airbnb Who Have to Pay to Talk to You” (ProPublica)
“Commitments to get back to a customer to resolve a particularly complicated issue had to be kept at or below 0.5% of the calls… She could offer a credit on a customer’s bill no more than once per 15 calls, and if she determined a customer was indeed owed money, any refunds or deductions had to average less than $2.50 per call.”
“Wall Street Whiz Finds Niche Selling Books on the Internet” (1996 WSJ)
“Today Mr. Bezos, an unassuming 32-year-old with thinning brown hair and frayed blue jeans, has quietly built a fast-growing business where the world's mightiest merchants have mainly racked up failures.”
“A Columnist Makes Sense of Wall Street Like None Other” (NYT)
“He once took a term that appeared in a lawsuit — a “cash-settled forward purchase agreement for Citigroup shares with downside protection in the form of a put option at the same price as the forward” — and gave it the acronym CSFPAFCSWDPITFOAPOATSPATF.”
Tweets of the Week
Until next week,
The Bear Cave