🐻The Bear Cave #50 + Apollo’s Epstein Problem🐻

New Activist Reports, Reviewing Apollo's Epstein Ties, Tweets of the Week, and More

Jan 26, 2021

Welcome to The Bear Cave — your weekly source of short-seller news. If you are new, you can join our email list here. Last week I also did an interview with Real Vision on the state of short-selling. Watch the full interview here.

New Activist Reports

Kerrisdale Capital published on Plug Power (NASDAQ: PLUG — $31.3 billion), a hydrogen fuel cell company. Kerrisdale wrote,

“The company’s stock has almost doubled in just the last few weeks… on the naïve excitement of uninformed investors over the prospects of the ‘hydrogen economy,’ or the idea that hydrogen power will be a critical part of the transition from fossil fuels to ‘green’ energy. But it’s all just a pipe dream, because ‘green’ hydrogen is too expensive and too inefficient to produce, store, transport, and burn.”

Plug Power currently trades at 40x 2024 revenue estimates and the stock is up around 1,600% over the last 12 months.

Iceberg Research published a follow-up report on Eos Energy Enterprises (NASDAQ: EOSE — $1.10 billion), a clean energy storage battery company that went public through a SPAC in November. The follow-up report highlighted changes the company made in its investor presentation around its alleged sales to spurious customers.

Muddy Waters Capital published a second open letter to Solutions 30 (EPA: S30 — EUR1.13 billion), a French tech services company. Muddy Waters criticized the limited scope of the company’s external investigation and highlighted potential money laundering issues raised by an anonymous report about the company.

CleanSpark (NASDAQ: CLSK — $654 million), a Utah-based energy software company, announced an investigation into anonymous short-activist Culper Research for publishing a critical report on the company earlier this month. Culper Research highlighted insider enrichment and promotional behavior at the company.

Triterras (NASDAQ: TRIT — $699 million), a “blockchain-enabled” trade finance lending platform, announced an independent investigation into a report published earlier this month by Phase 2 Partners that alleged significant related-party transactions. Triterras also disclosed that its auditor resigned.

The Bear Cave previously published two critical articles on Triterras, which you can read here and here, that also highlight related-party and management credibility problems.

Citron Research published a video highlighting five reasons GameStop (NYSE: GME — $5.36 billion) would fall to $20 per share. Since then, GameStop has doubled from roughly $40 to $80 per share.

Apollo’s Epstein Problem

The law firm Dechert LLP published its investigation into Apollo’s ties to Jeffrey Epstein. The report found that Leon Black, Apollo’s CEO and founder, paid Epstein $158 million in compensation over the last decade. You can read the full 22-page report here, but there is more to the story.

According to the report, Dechert was hired to:

“Conduct a thorough investigation into… [the] relationship, if any, between Apollo or any Apollo affiliate, and Epstein and any Epstein affiliate.”

Despite the broad mandate of “any Apollo affiliate” the report omits numerous ties between Epstein and Apollo executives. For example, John Hannan, a senior partner and co-founder at Apollo, reportedly made a $166,667 donation to Epstein's foundation and replaced Epstein on the Black Foundation Board in 2013. Those details were not included in the report.

On a similar note, Marc Rowan, an Apollo co-founder and senior director, reportedly met with Epstein at his townhouse a few years ago. That detail did not make into the Dechert report either. Mr. Rowan is expected to become Apollo’s CEO by July despite previously stepping away from day-to-day duties last summer to make “more time for his Hamptons restaurants.”

Likewise, William Mack, a founder and former managing partner of Apollo Real Estate Advisors, reportedly donated to Epstein’s charity. That donation was not included in the Dechert report either.

Dechert’s report says they were assisted in document gathering by Paul, Weiss, Rifkind, Wharton & Garrison LLP. A footnote in the report says that firm has previously served as Apollo’s outside counsel, which creates a potential conflict.

In discussing Black’s relationship with Epstein, the report says,

“Black describes himself as someone who believes in rehabilitation, and in giving people second chances. Based on this belief, he has maintained relationships with other notable figures in the business world, such as Michael Milken and Martha Stewart, who have spent time in prison.”

The choice of Michael Milken is an interesting example given that Milken reportedly had “longstanding ties” with Epstein. Moreover, one of Epstein’s defense attorneys, Gerald Lefcourt, also represented Drexel employees after the firm collapsed. Drexel was founded by Milken and previously employed Black and other Apollo co-founders.

The Dechert report also contains conflicting information. For example, regarding Black’s payment to Epstein, the report finds,

“Payments for work performed over the period 2012 through 2017 totaled $158 million. In 2013, payments were memorialized in signed and unsigned agreements. After that point, payments were made on an ad hoc basis based on Black’s perceived value of Epstein’s work.”

The report also says Black perceived Epstein’s work “substantially exceeded” his compensation,

“Black, as well as a number of witnesses, agreed that the value provided by Epstein to Black and the Family Office substantially exceeded the total compensation that Black paid to him.”

However, later on, the report details a fee dispute in which “Black agreed to pay Epstein $20 million rather than the $60 million demanded by Epstein.”

If Black believed Epstein’s work “substantially exceeded” his compensation, why did Black refuse to pay the $60 million requested by Epstein? Moreover, after the fee dispute began, Black made approximately $30 million in loans to Epstein. Why would someone ever loan money to a person during a financial dispute?

The report also outlines numerous social interactions between Black and Epstein in New York, Paris, Santa Fe, Florida, and the Caribbean. The report says,

“Black regularly visited Epstein’s townhouse in New York to either discuss business or to meet other prominent guests who were visiting Epstein… Black and his wife briefly visited Epstein at his residence in Paris for drinks ... Black and his wife also visited Epstein at his property in Santa Fe on a single occasion… Black also briefly visited Epstein in Florida on one or two occasions. Black recalls visiting Epstein’s island in the Caribbean on two occasions and was accompanied by his wife and one or more of his children on both.”

Shortly after the report was released, David Enrich, a business investigations editor at the New York Times, tweeted,

David Enrich @davidenrich

You will see other news organizations reporting on Black resigning after its review concluded he didn't do anything wrong. Keep in mind that Apollo appears to be releasing this news now because it knew @nytimes was about to publish a story about Black's huge Epstein payments.

More information on Apollo and Epstein is available in the thread below:

Edwin Dorsey @StockJabber

Apollo’s ties to Jeffrey Epstein are much greater than just Leon Black. This will get crazy👇👇👇

If you have any information on Apollo or Epstein please email me at edwin@585research.com or DM me on Twitter @StockJabber.

What to Read

“Problems at CuriosityStream (CURI)” (The Bear Cave premium)

“CuriosityStream (NASDAQ: CURI — $816 million) is an online streaming platform for educational documentaries. CuriosityStream stock has doubled since its November SPAC merger and the company tells investors it owns $1.3 billion worth of original content. In reality, most of CuriosityStream’s “documentaries” are less than three minutes long and much of the platform’s content is copied from public sources.”

“The Bit Short: Inside Crypto’s Doomsday Machine” (Medium)

“Bitcoin was clearly correlated with Tether; Tether was clearly being issued at a frantic rate; and that issuance had a high probability of being backed by nothing at all.”

“Short Bets Pummel Hot Hedge Fund Melvin Capital” (WSJ)

“Melvin Capital Management is down 15% just three weeks into 2021, thanks to a series of wrong-way bets that stocks including GameStop Corp. would slump…”