🐻The Bear Cave #63 + Peloton’s Serious Safety Problem🐻

New Activist Reports, Peloton's Safety Problem, Otonomo CEO Interview, Tweets of the Week, and More

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New Activist Reports

Bleeker Street Research published on Retractable Technologies (NYSE: RVP — $352 million), a manufacturer of small syringes that can be used for coronavirus vaccinations. Bleeker Street highlighted that the company’s $80 million government contract involved an executive’s sister who had government ties.

Bleeker Street also questioned whether the company is prioritizing the CEO over shareholders and wrote:

“RVP doesn’t own the patent for the product which makes up 85% of their revenue. Instead, they license it from their founder and CEO, paying him 5% royalties on gross sales. This has led to him receiving $45.9 million from the company since inception, while shareholders have been saddled with continual losses.”

RVP stock is up around 1,300% over the last two years.

Kerrisdale Capital tweeted critically about Nano Dimension (NASDAQ: NNDM — $1.86 billion) an Israeli 3D printing company that is up around over 800% in the last year.

Kerrisdale also questioned the quality of Nano Dimension’s product:

The Bear Cave previously published on the company and wrote,

“Nano Dimension’s current CEO has been previously accused, but never convicted, of an ‘extortion attempt’ and the company’s former Chairman was arrested on charges of money laundering, aggravated fraud, and securities violations. Nano Dimension’s history includes consistent unprofitability, serious dilution, an OTC to NASDAQ uplisting, a 50 for 1 reverse split, and 253 press releases.”

Keubiko published a Substack article on Clover Health (NASDAQ: CLOV — $3.56 billion), a health insurance company that went public through a SPAC in January. Clover Health spiked last week after erroneous data from S3 Partners calculated the short interest in Clover as 144% of the float when the actual short interest was closer to 35%. The main source of error was wrongly subtracting the founder’s class B shares from the class A share float count.

New short activist Eagle Eye Research published on Skillz (NYSE: SKLZ — $7.19 billion), a mobile gaming company. Eagle Eye Research alleged that Skillz gives new customers virtual cash to gamble in its apps and recognizes the gift as a non-cash expense; then, when that virtual cash is spent in-app the company allegedly recognizes the spending as revenue. This is problematic because the transactions lack economic substance and dramatically inflates Skillz’s actual business. Eagle Eye Research also highlighted Skillz’s high churn and aggressive 17x revenue valuation.

In March, Wolfpack Research wrote that the company “has a history of announcing partnerships which have historically amounted to very little.” A separate anonymous report also raised questions about Skillz’s business.

Travis Wiedower published on Burford Capital (NYSE: BUR — $2.42 billion) and called the litigation finance corporation “the most undervalued company I know.” Burford finances costly corporate litigation and then receives a percentage of any settlement. Muddy Waters previously accused the company of “Enron-esque mark-to-model accounting.”

Spruce Point Capital published a “strong sell” opinion on Danimer Scientific, Inc (Nasdaq: DNMR — $2.11 billion), a biotech company that is trying to make degradable plastics. Spruce Point alleged that Danimer made inaccurate statements about its product and highlighted litigation with a former CEO that alleged “securities fraud” at the company.

Peloton’s Serious Safety Problem

Peloton (NASDAQ: PTON — $29.8 billion), a home exercise equipment company, is in crisis after its treadmill has been linked to one death and at least 38 other safety incidents.

Peloton initially said that it reported the death to the Consumer Product Safety Commission (CPSC) “immediately” as required by law. That was later contradicted by the Washington Post which wrote that Peloton reported the death to regulators on March 4, the day after learning about the incident.

The Consumer Product Safety Commission webpage warns businesses that:

“Failure to report this type of information immediately and in full detail could lead to the imposition of substantial civil or criminal penalties.”

On March 29th, 26 days after Peloton learned about the death, the company provided the Consumer Product Safety Commission contact information for some families involved in its treadmill safety incidents but did not give regulators the contact info for the family involved in the fatality.

Peloton’s CEO John Foley wrote that the non-compliance was over privacy concerns:

“We have fully cooperated with CPSC and responded to all of their requests, with one exception: we resisted their demands for personally identifiable information of certain Members because those Members had specifically requested that we not provide that information to CPSC. At no time was Peloton trying to impede CPSC’s investigation. We were simply standing behind our Members’ right to maintain their privacy…”

Foley’s note leaves out that Peloton also refused to provide the Consumer Product Safety Commission contact info for the family’s lawyer. On April 12, the CPSC’s four commissioners voted to subpoena Peloton. An official told the Washington Post, “This was not a friendly subpoena.”

Consumer Reports, a non-profit dedicated to unbiased product testing, called Peloton’s actions “outrageous” and highlighted that Peloton’s treadmill is designed with “an unusual belt design that uses individual rigid rubberized slats or treads that are interlocked and ride on a rail.” Those issues as well as the treadmill’s height off the ground can lead to small children being pulled under:

In its statement Peloton told consumers:

“The Tread+ is safe when our warnings and safety instructions are followed [and] the Tread+ is not for children under 16, and children, pets, and objects need to be kept away from the Tread+ at all times.”

Peloton previously faced criticism from the safety advocacy group Kids in Danger for displaying an improperly formatted baby crib in the background of one of its ads. That ad was later removed after following a petition with over 2,000 signatures.

In the world of business, trust is hard to earn and easy to lose. Peloton is losing it fast and shows no signs of improving. In its most recent statement CEO John Foley said the company has “no intention” of issuing a recall. Time will tell.

The Bear Cave is conducting a full investigation into the Peloton situation and is requesting tips. Please hit reply or email edwin@585research.com with any information about Peloton.

Interview with Otonomo CEO Ben Volkow

Last week I interviewed Ben Volkow, the CEO and founder of Otonomo. Israel-based Otonomo is a connected car data platform marketplace that is going public through the Software Acquisition Group II SPAC (NASDAQ: SAII).

Many new cars are built with the ability to gather and transfer huge amounts of data. Otonomo currently collects data from over 40 million new cars on ~150 data attributes such as location, speed, acceleration, turning radius, camera video, and more. Otonomo has a chance to be the leading platform in this new market.

Check out our conversation below:

The Bear Cave previously highlighted potential at Otonomo here.

(Full disclosure: I own SAII stock and warrants. This is not investment advice and always do your own research before making investment decisions.)

What to Read

“The Rage of Carson Block” (Institutional Investor)

“One denial came years ago from Credit Suisse, whose prime brokerage salesman had called Block while he was at the hospital awaiting the birth of his first child. It was the first time I ever heard the sentence, ‘The reputation risk committee has denied us doing business with you.’”

“Executives Wonder if Their Stock Selloffs Were Linked to Archegos” (WSJ)

“Executives at online lender LendingClub and digital streaming service fuboTV still aren’t sure if sudden swings in their stock were from banks unloading billions of dollars in Archegos investments—or if the drop was from something else entirely, according to people familiar with the matter.”

“How Hubert Joly Changed Best Buy Without Everyone Hating Him” (WSJ)

“In 2012, many predicted the end was near for the legendary Minneapolis electronics retailer. A new boss knew he would need to shake things up. The question was how.”

Tweets of the Week

Until next week,

The Bear Cave

(P.S. Stay tuned for a very special announcement in next week’s newsletter🤫)

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The Bear Cave is Not Investment Advice. Twitter: @StockJabber