🐻The Bear Cave #45🐻

Funky Disclosures at Triterras, New Activist Reports, Tweets of the Week, and More

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New Activist Reports

Marcus Aurelius Value Research published a 16-page document detailing seven employee whistleblowers alleging fraud at the Chinese online education company GSX Techedu (NYSE: GSX — $14.3 billion). The allegations are from an amended complaint by investors suing the company.

The complaint describes a revenue round-tripping scheme where GSX would allegedly pay third-parties for marketing campaigns, but those third-parties would use the majority of funds to purchase virtual GSX classes to inflate revenue. In addition, the complaint alleges whistleblower retaliation by the company as well as “a culture where deception in many forms is rampant and encouraged.”

Penumbra (NYSE: PEN — $6.61 billion), a catheter maker whose products have been linked to at least 18 deaths, issued an “urgent voluntary recall” for its JET 7 Xtra Flex catheter. The recall comes after weeks of public criticism from short-sellers Gabriel Grego and Marc Cohodes. Penumbra stock is down around 30% over the last month.

J Capital Research published on CBAK Energy Technology (NASDAQ: CBAT — $376 million), a Chinese battery company. J Capital wrote, “CBAT represents a rare trifecta of Chinese fraud: a reverse merger, a Tier 3 auditor, and a suspect broker.”

Muddy Waters raised concerns about an ongoing “independent” investigation at Solutions 30 (EPA: S30 — EUR1.01 billion), a French tech services company. An anonymous 114-page report alleged the company had ties to criminals, money laundering, and financial filings “riddled with errors.”

Hindenburg Research published an update on Loop Industries (NASDAQ: LOOP —$318 million), a recycling tech company with minimal revenues. Hindenburg wrote,

“We remain short Loop’s stock with a price target of $0 and continue to strongly believe that Loop’s claimed technological advancements do not exist.”

Citron Research published on DoorDash (NYSE: DASH — $52.8 billion) and called the company “the most ridiculous IPO of 2020.” Citron argued the food delivery company has no brand loyalty and highlighted that the company raised money at a $16 billion valuation less than six months ago. The company currently trades at 19x sales and has 75% downside to fall in line with peer valuations.  

Citron also tweeted critically on self-driving tech company Luminar Technologies (NASDAQ: LAZR — $8.95 billion) and tweeted about augmented reality company Vuzix (NASDAQ: VUZI — $355 million):

Viceroy Research criticized the roll-up strategy of WiseTech Global (ASX: WTC — AUD$9.96 billion), an Australian logistics software company. The company has made 57 acquisitions since 2015 and many have performed poorly according to Viceroy. J Capital Research has previously published multiple reports on WiseTech. The company currently trades around 23x revenue and its stock is up around 600% over the last five years.

Independent journalist Roddy Boyd published an outstanding report on Freedom Holding Corp (NASDAQ: FRHC — $2.61 billion), a retail brokerage with primary operations in Kazakhstan. Boyd raised multiple potential issues with the company: a third-tier auditor, a U.S. headquarters in a co-working space, and an outside legal advisor with little public information.

The report highlighted the company’s ties to a Belize City-based broker-dealer, odd lock-up restrictions for clients, and related party transactions. In addition, although the company appears to have ample liquidity, it is offering clients money market rates around 5x that of U.S. institutions. Freedom Holding Corp stock is up around 700% over the last three years.

Unlike other activists, Roddy Boyd takes no stock positions and publishes his work under The Foundation for Financial Journalism, a donor-funded non-profit. Roddy’s work has helped expose accounting problems at Wirecard and Roddy was one of the earliest whistleblowers on the opioid epidemic. If you are passionate about accountability journalism please consider supporting Roddy on Twitter @RodBoydILM and on his donation page.


Funky Disclosures at Triterras

I am fascinated by Triterras (NASDAQ: TRIT — $703 million), a “custom-built, blockchain-enabled, end-to-end global trade and trade finance platform” that went public through a SPAC earlier this year.

The CEO of Triterras, Srinivas Koneru, also founded Rhodium Resources, a commodity trading company. It appears Triterras emerged from Rhodium around 2018 as a way to manage contractual documents between trading counterparties. Triterras and Rhodium have adjacent offices in Singapore and Triterras discloses,

Our business has substantially depended on our relationship with Rhodium Resources Pte. Ltd., a physical commodity trader, to initially deliver customers and drive traffic for our platform, and any future changes in this relationship may adversely affect our business, financial condition and results of operations.

Last Thursday, Triterras put out a 6-K announcing that Rhodium Resources Pte. Ltd. received “a statutory demand for payment… pursuant to the Singapore Insolvency, Restructuring and Dissolution Act.” The company added that Rhodium is looking to “restructure its debts.”

Srinivas Koneru has multiple past business ties to the management of the Netfin Acquisition Corp SPAC that took Triterras public. Interestingly, on page 61 of its prospectus, the Netfin SPAC discloses that it initially planned to acquire Rhodium Resources, but later changed course and only acquired the current Triterras entity.

The above disclosure seems to be intentionally confusing because the Netfin SPAC labeled Rhodium Resources and its subsidiaries as “Triterras Holdings.” (Incidentally, two weeks ago Rhodium Resources changed its name to Antanium Resources.)

Regardless, based on the disclosures, it appears the Netfin SPAC wanted to originally take public a business only months away from restructuring, Rhodium Resources, and once that was not viable decided to take a smaller sister company, Triterras, public.

Learn more about Triterras, its management, and its related-party dealings in last week’s report for paid Bear Cave subscribers here.

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What to Read

“The Journalist and the Pharma Bro” (ELLE)

“Why did Christie Smythe upend her life and stability for Martin Shkreli, one of the least-liked men in the world?”

“384 Ways to Help” (MacKenzie Scott Medium)

“Because our research is data-driven and rigorous, our giving process can be human and soft. Not only are non-profits chronically underfunded, they are also chronically diverted from their work by fundraising, and by burdensome reporting requirements that donors often place on them.”

“Mutant coronavirus in the United Kingdom sets off alarms but its importance remains unclear” (ScienceMag)

“Scientists, meanwhile, are hard at work trying to figure out whether B.1.1.7 is really more adept at human-to-human transmission—not everyone is convinced yet—and if so, why.”


Tweets of the Week


Happy Holidays,

The Bear Cave

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