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New Activist Reports
Two anonymous short activists, Akram’s Razor and Swan Street Research, published on Yalla Group (NYSE: YALA — $2.24 billion), an audio-based social network sometimes called “the Clubhouse of the Middle East.” The reports allege the Yalla is dramatically overstating user metrics and concealing its ties to China. In addition, Swan Street Research questioned whether Yalla’s revenue and cash balances are real. Separately, The Bear Cave also published on Yalla and highlighted issues around potential bot activity on the app.
Night Market Research published on Cielo Waste Solutions (TSX: CMC — CAD$307 million), a trash-based renewable energy company. Night Market alleged that the company is propped up by related-party joint ventures and the CEO’s previous companies ended in bankruptcy.
Iceberg Research published a second report on Diginex Ltd (NASDAQ: EQOS — $199 million), a Hong Kong-based crypto exchange that went public via SPAC in September. Iceberg Research wrote,
“We strongly believe that Diginex has used wash trading to artificially inflate trading volume, a technique whereby an exchange creates multiple accounts on its platform and uses trading algorithms to buy and sell with its own accounts.”
Iceberg Research also discovered that Diginex’s “head of exchange” and CTO both previously worked at Quoine, a Japanese crypto exchange that falsified user metrics.
Hindenburg Research published on HUMBL Inc (OTC: HUMBL — $823 million), an early-stage payments company that went public through a reverse merger in October 2020. The company has no revenue in 2020 and only $156,000 in revenue in Q1 2021. Hindenburg also alleged that many of the company’s customers and payment partners do not exist in substance. Hindenburg concluded,
“In the past year, faith-based go-public transactions such as HUMBL have brought the investing public an endless parade of risky companies that boast of all the things they will someday revolutionize. Meanwhile, while investors are strung along by hope, and lulled into looking the other way, they face a literal reality of billions of shares becoming available to convert and sell.”
Muddy Waters Research published an update on Solutions 30 (EPA: S30 — EUR326 million), a French tech services company. The stock is down 70% today after its auditor, Ernst & Young, refused to sign off on its annual statements. Muddy Waters previously published multiple open letters as well about missing emails and other issues at the company.
Spruce Point Capital published a second update on Danimer Scientific (NYSE: DNMR — $1.81 billion), a biotech company that is trying to make degradable plastics. The update alleged that Danimer was under a “formal inquiry” by Kentucky’s securities regulator. The report also misquoted David Einhorn, which prompted a correction tweet from Einhorn:
What to Read
“Oil exploration company in Okavango wilderness misled investors, complaint to SEC says” (National Geographic)
“A whistleblower complaint to the U.S. Securities and Exchange Commission cites ‘egregious’ violations by ReconAfrica and executives…”
“Hertz, the Original Meme Stock, Rewards Its True Believers” (WSJ)
“It is not a great look for the legal system to label retail investors as irrational for paying $2 a share and then approve sophisticated funds willing to pay $8 per share.”
“‘They tried to destroy me’: Wirecard’s reluctant whistleblower tells his story” (FT)
“What is the meaning of doing the right thing? It always comes at a cost, including for the vast majority of Wirecard employees who were innocent. I always used to take the train from Munich city centre out to Aschheim and you’ll see the whole campus around Wirecard would be full of IT, admin, engineering people — and now [most] of them have lost their jobs. It was just a big nothing which only benefited a few criminals.”
Tweets of the Week
Until next week,
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The Bear Cave is Not Investment Advice. Twitter: @StockJabber