🐻The Bear Cave #65🐻

5 New Activist Reports, The Unbelievable Archegos Story, Tweets of the Week and More!

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New Activist Reports

Citron Research published positively on Jumia Technologies (NYSE: JMIA — $2.39 billion), an African online marketplace similar to eBay. Citron highlighted that Jumia is the most popular online shopping app in Africa and the fifth most admired brand on the continent. Citron argued that given recent investments by Facebook, Amazon, and Google in Africa, Jumia would be a natural acquisition target, especially at its $2.4 billion valuation. Citron said the company “has the potential to go up 300% in the next 12 months.”

Hindenburg Research published on PureCycle Technologies (NASDAQ: PCT — $1.80 billion), a zero-revenue ESG-themed SPAC merger that claims to revolutionize plastic recycling. Hindenburg Research highlighted that PureCycle’s executive team “collectively took 6 companies public prior to PureCycle. All have failed, resulting in 2 bankruptcies, 3 delistings, and 1 acquisition after a ~95% decline.” Hindenburg also wrote,

“In our opinion, PCT represents the worst of SPACs; a key example of how execs & sponsors enrich themselves while hoisting unproven tech & ridiculous financial projections onto public markets, leaving retail investors to face the ultimate consequences.”

Roth Capital and Craig Hallum Capital served as PureCycle SPAC sponsors and both rate the stock a buy.

Blue Orca Capital published on So-Young International (NASDAQ: SY — $940 million), a Chinese plastic surgery reservation platform. Blue Orca conducted two data scrapes of the company’s website and alleged the company was faking around 80% of the reservations made through the platform. Blue Orca also highlighted that multiple Chinese media outlets have reported on fraudulent transactions and kickbacks given to clinics that booked fake transactions on the platform. In response to Blue Orca’s report, the company announced a $70 million buyback.

Culper Research published on Aterian (NASDAQ: ATER — $468 million), a roll-up of consumer product companies. Culper Research alleged that “25% of Aterian shares now belong to two felons and two alleged scam artists, all of whom will be free to dump their stock by August.” Culper also highlighted that many of the company’s recent acquisitions involve products like hand sanitizer that will see sales plummet as the pandemic wanes.

Spruce Point Capital published a second report on Danimer Scientific (NYSE: DNMR — $1.54 billion), a biotech company that is trying to make degradable plastics. Spruce Point received data from a FOIA request filed with the Kentucky Department of Environmental Protection that suggests the company is inflating production volumes and average selling prices. Danimer stock is down about 50% in the last month.

The Unbelievable Archegos Story

Bill Hwang reportedly grew assets in his family office from $200 million in 2013 to $20 billion in 2021. That’s 100x in eight years or a 78% annualized return after tax. How?

Netflix, one of Hwang’s best performing reported holdings, increased 35x from 2013 to 2021. Amazon increased 12x over the same time period. But those fall well short of Hwang’s reported returns. Hwang’s past returns at Tiger Asia don’t seem to fit the bill either. Tiger Asia reportedly annualized 16% around from its 2001 inception to its 2012 closing and reportedly annualized 40% during the bullish years of 2001 to 2007.

Yet, after pleading guilty to illegal trading, losing access to some Asian markets, and losing access to some prime brokers, Hwang supposedly trounced his past performance and amassed a fortune greater than Steve Cohen and Julian Robertson combined, all without a whisper of publicity.

Maybe the starting figure of $200 million is wrong, maybe Hwang successfully used serious leverage throughout all eight years, or maybe the ending $20 billion was not all Hwang’s own capital as some on Twitter have theorized:

Last week Cathie Wood also announced on CNBC that Hwang had seeded the first four ARK Invest funds starting in 2014, less than two years after Hwang pled guilty to insider trading.

Wood said she did not know if Hwang was still invested in ARK or if he was behind recent redemptions at her firm. ARK Invest saw consistent outflows last week and also began reducing stakes in illiquid holdings. The Bear Cave previously highlighted that ARK’s large stakes in mid-size companies could be hard to unwind if ARK ever faced persistent outflows.

One firm that did not suffer much from the Archegos fallout is Goldman Sachs, which was rumored to have even profited. Perhaps not coincidentally, the Co-President, Head of Quantitative Research, and Chief Compliance Officer at Archegos Capital all previously worked at Goldman according to the firm’s archived website.

What to Read

“Short Seller Soren Aandahl Chases Targets With New Hedge Fund” (Bloomberg)

“Activist short seller Soren Aandahl is launching his first hedge fund, with a mandate to find accounting malpractice and overvalued stocks all over the world. The Blue Orca Global Activism Fund starts trading Monday with $25 million in assets under management…”

“Friends and Colleagues Remember David Swensen” (Institutional Investor)

“As I look back on my career, there is no teacher who had a greater impact on my career and life than David.”

Tweets of the Week

Until next week,

The Bear Cave

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