🐻The Bear Cave #39🐻
10 Companies to Watch (NVEE, CELH, PDFS, ZUO, ONE, LPSN, PING, JAMF, MSP, LRN)
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10 Companies to Watch
There were no new short activist campaigns this week. Instead, The Bear Cave is highlighting ten companies on our watchlist.
NV5 Global (NASDAQ: NVEE — $810 million) is an engineering services roll-up and has received three comment letters from the SEC since July 1st of this year (1, 2, 3). The letters focus on revenue recognition and accounting issues. The SEC noted,
“It appears undue prominence is given to your non-GAAP financial measures.”
The company changed auditors in 2016 and changed CFOs in 2019. You can read a thoughtful 2018 Value Investors Club write-up on NV5 Global here.
Celsius Holdings (NASDAQ: CELH — $1.70 billion), a maker of healthy energy drinks, uses an auditor not used by any other NYSE or NASDAQ listed company and has told the SEC it does “not expect that our disclosure controls or internal controls will prevent all error and all fraud.” The company has legacy ties to bankers involved in 1MDB and loosened its revenue recognition policy in 2018. (Read more here.)
PDF Solutions (NASDAQ: PDFS — $753 million), a software and engineering company, has had three different CFOs over the last five years. In September 2018 the company replaced PwC as its auditor with BPM LLP. Two months later the company responded to an SEC comment letter concerning its revenue recognition. Since switching auditors the company has not posted a GAAP profit, yet the stock is up over 100% in the last five years.
Zuora (NYSE: ZUO — $1.23 billion), an enterprise software company, received two comment letters from the SEC concerning its revenue recognition and other issues in 2019. In response, Zuora said,
“The Company revised its method of calculating subscription revenue from new customers…”
Zuora replaced its CFO earlier this year, trades around 4x revenue, has posted GAAP losses every quarter since IPO, and has revenue growing around 15% annually.
OneSmart International Group (NYSE: ONE — $666 million), a Chinese online education and daycare company, has received some scrutiny from the SEC. In an April comment letter the SEC noted,
“It appears your officer certifications … do not include the language referring to internal control over financial reporting that should appear.”
The SEC had also raised questions about the company before its NYSE listing. In a March 2018 letter, the company responded to an SEC question trying to reconcile revenue and enrollment growth. OneSmart wrote,
“The Company respectfully advises the Staff that there was an error in the average monthly enrollment figures in fiscal years 2016 and 2017…”
In 2019 OneSmart’s CFO resigned and in 2020 its audit committee chairwomen resigned. According to the company both resigned “due to personal reasons.” (Read more here).
LivePerson Inc (NASDAQ: LPSN — $3.99 billion), an AI chatbot company, has had three CFOs in the last three years and uses BDO as its auditor. The company’s current CFO is 38.
Ping Identity Holdings (NYSE: PING — $1.87 billion), JAMF Holdings (NASDAQ: JAMF — $4.28 billion), and Datto Holdings (NYSE: MSP — $4.89 billion) are all recent IPOs of Vista Equity Partners, a software-focused private equity the firm. Vista’s co-founder recently reached a $139 million non-prosecution agreement over his personal tax fraud. Vista’s other co-founder left the board of Datto Holdings in October and plans to leave the firm. Above all, Vista has been accused of questionable conduct with portfolio companies. PING stock fell 18% last week after the company missed earnings.
K12 Inc (NYSE: LRN — $1.04 billion), an operator of online public schools, has been pitched as a play on the coronavirus pandemic, and the company is known for its ties to the Trump administration. In reality, K12 is a failing education provider and may be one of the biggest losers of a Biden administration.
As California’s attorney general Kamala Harris prosecuted the company and a large school district recently started a corruption investigation into potential bribery by K12. The company has not disclosed the issue to investors.
The Bear Cave published an investigation into K12 for premium subscribers last week. Become a premium subscriber today to read our full K12 profile and receive our next deep-dive report on Thursday, November 19.
Learn more about The Bear Cave premium here.
The Chartcast Podcast Appearance
Last week I went on The Chartcast podcast to discuss my unique career, my campaign to expose Care.com, and plans for the future. You can listen to the episode on Spotify here. I highly recommend the podcast and personally support the show’s Patreon.
If you are interested in fraud, corruption, and Tesla, you should follow the two hosts on Twitter @TeslaCharts and @georgia_orwell_
The TIKR Terminal – Free Transcripts, Financial Data, and More
(Sponsored) The TIKR Terminal is a free and easy way to find call transcripts, financial statements, and stock ownership figures. The TIKR Terminal is the perfect tool for anyone without access to a Bloomberg terminal and is completely free. Sign up today at this link.
If you want to promote an event, service, or job opening please contact edwin@585research.com
What to Read
“Warren Buffett on Buybacks & Boards” (NonGaap Substack)
“Capital Allocation and Governance Takeaways from Berkshire Hathaway's Annual Letter and Meeting”
“Illuminating the Garden Path” (MIT Endowment Manager)
“Here are some real-life examples of MIT’s investor partners that started with very modest AUM, focused on compounding capital, and patiently grew AUM organically and through word-of-mouth referrals.”
“Evidence of PPP Fraud Mounts, Officials Say” (WSJ)
“The watchdog counted tens of thousands of companies that received PPP loans for which they appear to have been ineligible, such as corporations created after the pandemic began, businesses that exceeded workforce size limits (generally 500 employees or fewer) or those listed in a federal “Do Not Pay” database because they already owe money to taxpayers.”
Tweets of the Week
Until next week,
The Bear Cave