🐻The Bear Cave #49🐻

New Activist Reports, Coronavirus Corruption, Tweets of the Week, and More!

Jan 19, 2021

Welcome to The Bear Cave — your weekly source of short-seller news. If you are new, you can join our email list here.

New Activist Reports

Iceberg Research published a great report on Eos Energy Enterprises (NASDAQ: EOSE — $1.15 billion), a clean energy storage battery company that went public through a SPAC in November. Iceberg highlighted that the company had only $35,000 of revenue in the first nine months of 2020 and that its surge in orders come from customers that may not exist or have the ability to pay.

Iceberg Research first gained a following after exposing accounting problems at Noble Group that led to a 99% decline at the commodity trading firm. Follow them on Twitter @IcebergResear

Viceroy Research published on Tyro Payments (ASX: TYR — AUD$1.49 billion), an Australian payments company. According to Viceroy, about half of Tyro’s merchant terminals are currently offline due to a failed software upgrade. Many of these merchants are switching to competitors like Square, which may permanently damage Tyro’s business.

Viceroy also published a Twitter thread criticizing the company’s antiquated technology:

Viceroy @viceroyresearch

$TYR is the most underwhelming fintech in the ASX, and more closely resembles a bank. Its major revenue driving activity is simply providing merchant terminals – which have remained largely unchanged for a decade – to SMEs 4/n

Citron Research did a live Twitter video on Lemonade (NYSE: LMND — $8.87 billion), an app-based insurance company. Citron highlighted that insiders have sold $400 million of stock in the last six months and said the company would have problems with the SEC and FTC and that the company “has been lying to their customers and their shareholders.” Earlier this month, The Friendly Bear questioned Lemonade’s philanthropic promises and high insider selling.

Citron Research also published positively on Stem Inc (NYSE: STPK — $1.51 billion), a leader in clean energy storage systems. Citron argued that the incoming Biden administration will lead to an explosion in clean energy storage and Stem Inc has qualified management and a 10-year head start on competitors. Citron also tweeted positively about Jumia Technologies (NYSE: JMIA — $3.52 billion), an African e-commerce company.

Culper Research published a great report on CleanSpark (NASDAQ: CLSK — $747 million) and called the Utah-based energy software company “an insider enrichment scheme which, at every turn of its promotion, has vastly overstated or simply fabricated key elements of its business.” Culper Research also said,

“We also find that CleanSpark is rife with undisclosed related party transactions that we believe have effectively siphoned capital from shareholders to the pockets of insiders…CleanSpark’s promotional charade has spanned marijuana, clean energy, “SaaS”, electric vehicles, and, most recently, bitcoin.”

Culper Research also published an open letter to Deloitte regarding “questionable practices and deficient disclosures” at Orthopediatrics Corp (NASDAQ: KIDS — $798 million), a pediatric orthopedics company. Culper previously published two (1, 2) critical reports on the company.

Grizzly Research published on DouYu International Holdings (NASDAQ: DOYU — $3.85 billion), a Chinese live streaming platform. Grizzly Research claimed the company was involved the illegal online gambling on the platform and said that the company’s second most prominent streamer was recently arrested.

Mariner Research published on Beam Global (NASDAQ: BEEM — $426 million), a solar-powered electric vehicle charging company. Mariner highlighted excessive insider compensation, questionable management, a history of losses, and slowing growth at the company. Beam stock is up around 800% over the last year.

J Cap Research published a stunning report on Bit Digital (NASDAQ: BTBT — $800 million), a Bitcoin mining company. J Cap alleged numerous company executives were in jail or fleeing investigations, including the company’s controlling shareholder. J Cap wrote,

“BTBT is now onto its third scheme since IPO for stealing money from investors. There was P2P lending, car rental, and now “bitcoin mining.” The company reported at end Q3 2020 that it was operating 22,869 bitcoin miners in China. That is simply not possible… To operate this sham bitcoin business, BTBT acquired a Hong Kong company called XMAX and employed one of its founders, Yu Hong, without disclosing Yu’s relationship. We found seven lawsuits against Yu Hong in China by disgruntled investors in his various other companies.”

Phase 2 Partners published a 52-slide report on Triterras (NASDAQ: TRIT — $672 million), a “blockchain-enabled” trade finance lending platform that went public through a SPAC in November. Using Ethereum Blockchain data the report finds that on the company’s platform “at least 75% of transactions have connections to key company executives.” The report uncovers new undisclosed related-parties and is a great example of using public Blockchain data in research. Triterras disputed the report and announced a $50 million stock buyback.

The Bear Cave previously published two critical articles on Triterras, which you can read here and here, that further highlighted related-party and management credibility problems. Triterras stock was down 40% last week.

Coronavirus Corruption?

Shares in Retractable Technologies (NYSE: RVP — $423 million), a maker of small syringes, are up around 700% over the last twelve months on investor optimism that the company will sell its product as part of the vaccination roll-out. In March 2020, Retractable received an $83.8 million order from the U.S. Department of Health and Human Services.

However, a few weeks after receiving the $83.8 million purchase order, Retractable secured a $1.4 million hardship loan under the Paycheck Protection Program and certified that "current economic uncertainty makes this loan request necessary to support the ongoing operations" according to an investigation by NBC News.

Furthermore, in July Retractable signed a $53.7 million Technology Investment Agreement with the U.S. Government to help build out manufacturing capacity. In an 8-K announcing the deal Retractable disclosed,

“The principal purpose of the [Technology Investment Agreement] is for Government investment to fund increasing RTI’s manufacturing capacity for hypodermic safety needles and corresponding syringes in response to the worldwide COVID-19 global pandemic.”

That disclosure appears to be misleading. A copy of the exhibit containing the government cost-sharing contract appears to be improperly redacted because the redactions disappear when they are highlighted. The unredacted exhibit shows the Retractable is responsible for at least half the build-out costs, a figure which has not been clearly communicated to investors.

(Top: Redacted cost-sharing agreement. Bottom: Unredacted cost-sharing agreement reveals Retractable is responsible for 50% share.)

Beyond the questionable disclosures, the Retractable situation has attracted the scrutiny of some lawmakers. In response to an NBC News inquiry Rep. Josh Gottheimer, D-N.J., whose district includes Becton Dickinson, the largest needle and syringe manufacturer in the country, said,

"The administration gave a multimillion-dollar contract to a business who can't produce the necessary supplies — and who, simultaneously, received a PPP loan. It's left a lot of us scratching our heads."

Taxpayers are lending the company money from a fund met for small business distress, paying the company $83.8 million to produce syringes, and then sharing $53.7 million in costs to help Retractable build the capacity to fill a government order. Why? Why would the U.S. Government not choose a more established manufacturer?

The answer may be Lillian Salerno. According to her LinkedIn, Ms. Salerno, who previously served as an administrator in the USDA and lost a race for Congress in 2018, joined “LES Development LLC” in May 2020 where she:

“Provided innovative solutions to ensure that the essential supplies for a COVID-19 vaccine are manufactured in the US as part of Operation Warpspeed."

Ms. Salerno was also a founder and early director at Retractable and as recently as 2016 she disclosed a 6% equity stake in the company. Her brother, Lawrence G. Salerno, is currently director of operations at Retractable. According to the improperly redacted exhibit, Mr. Salerno is the company representative that signed the U.S. government cost-sharing contract.

The Bear Cave previously reported on how penny stocks tied to Donald Trump Jr. benefited during the coronavirus pandemic. Read more here.

New Paid Report on Thursday

This Thursday (January 21) The Bear Cave will expose a ~$1 billion SPAC that is misleading investors and customers. If you are not a paid subscriber, join today to get two deep-dive investigations every month.

Learn more about paid subscriptions here.

What to Read

“Let’s Fix America’s Corporate Disclosure System” (Bloomberg)

“For nearly three decades, the Electronic Data Gathering Analysis and Retrieval service, known as Edgar, has been providing investors with free access to practically every document that companies file with the SEC… Here’s a list of things that could stand improving…”

“AP Exclusive: Selena Gomez: Big Tech ‘cashing in from evil’” (AP)

“Gomez is among a growing number of celebrities using their platforms to call out social media, including Sacha Baron Cohen, Leonardo DiCaprio, Jennifer Lawrence, Kerry Washington, and Kim Kardashian West.”

“Snapchat Wants You to Post. They’re Willing to Pay Millions.” (New York Times)

“Andrea Romo, 27, earns $12.50 an hour as a merchandise associate at Lowe’s in Albuquerque... When she noticed the new Spotlight feature on Thanksgiving, she decided to upload a video of her sister deep frying a turkey. Two weeks later, Ms. Romo learned that her video was so popular that it had earned her about half a million dollars.”