The Bear Cave #68
Six New Activist Reports, Red Flags at Moxian (MOXC), What to Read, and Tweets of the Week
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New Activist Reports
White Diamond Research published on Intrusion Inc (NASDAQ: INTZ — $262 million), a cyber security company. White Diamond wrote “management has shown itself to be possibly the most blatantly dishonest management of a public company that we have ever seen” and said that Intrusion had bought an innovation award it won. White Diamond also highlighted that the CEO’s previous company was sued by the Queens Borough Public Library for exaggerating the abilities of a library automation system it was selling.
Mariner Research published on Rekor Systems (NASDAQ: REKR — $461 million), a license plate analytics company. Rekor’s automatic license plate recognition technology is used for toll roads, parking enforcement, and red-light cameras among other uses. Mariner Research highlighted that the company’s technology will be negatively impacted by “a lack of legislative progress” in many key U.S. states.
Akram’s Razor published a follow up report on Yalla Group (NYSE: YALA — $2.24 billion), an audio-based social network sometimes called “the Clubhouse of the Middle East.” The new report alleged that Yalla Group has deleted fake users on its platform and seen traffic declines of 70%+. Last week The Bear Cave, Akram’s Razor, and Swan Street Research all published on Yalla.
Culper Research published an update on LifeMD (NASDAQ: LFMD — $337 million), a telehealth company. Culper highlighted management’s past questionable business ventures and alleged a paid Seeking Alpha stock promotion.
Alex Pitti published a second Seeking Alpha article on PureCycle Technologies (NASDAQ: PCT — $2.04 billion), a zero-revenue ESG-themed SPAC merger that claims to revolutionize plastic recycling. Pitti claimed PureCycle’s CFO called him to complain about his past negative coverage of the company. Hindenburg Research previously published on the company and the questionable track record of the management team, which includes two bankruptcies and three delistings.
Muddy Waters Research published another update on Solutions 30 (EPA: S30 — EUR529 million), a French tech services company that has fallen over 70% since its auditor refused to sign off on its annual financials. Muddy Waters, which has been short Solutions 30 for at least two years, wrote,
“In Solutions 30, we find a number of analogs to Wirecard aside from having a cast of shady characters. Both have gotten as far as they have due to European issues: willful blindness of investors to glaring problems, a culture of extreme credulousness of companies along with a disdain for their critics, and a patchwork legal and regulatory framework that makes Europe fertile ground for corporate misbehavior.”
Red Flags at Moxian Inc
Moxian Inc (NASDAQ: MOXC — $205 million) is a U.S.-listed Chinese “pioneering internet company” that represents the worst of retail driven trading mania. Over the last six months, Moxian generated $22,000 of revenue (yes, twenty-two thousand dollars) and seen its stock rise over 700%. Why?
Moxian’s corporate website does not provide much help. It is in broken English and has no press releases in the last six months. Moxian’s SEC filings don’t give much of a clue either. For 2020, Moxian disclosed having eight full-time employees and identified the following material weaknesses:
“(1) A lack of understanding of the requirements of NASDAQ, made worse by a poor or no command of the English language
(2) Contracts are often done hurriedly and in Chinese and presented late to the Board for approval
(3) There are no written policies and procedures covering such operational activities such as sales and procurement due to a lack of staff stability, especially at senior management levels
(4) Chinese accounting rules require standard official invoices to be issued before they can be recognized in the accounting records so cut-offs remain an issue.” (Page 18 of MOXC’s 10-K)
Moxian’s auditor is Centurion ZD CPA & Co and its audit committee chairman is Lionel Choong Khuat Leok. Mr. Choong previously served as the CFO for Logiq Inc. (OTCQX: LGIQ), which has since fallen over 90%. Two of Moxian’s current directors, James Tan and William Yap Guan Hong, were the CEO and CFO of 8i Enterprises Acquisition Corp, a SPAC that merger with Hong Kong cryptocurrency exchange Diginex (NASDAQ: EQOS). Diginex has also been accused of fraud and is down 40% since the SPAC closing. In addition, three of Moxian’s board members resigned on the same day in February.
One answer for Moxian’s rise may be a successful unregistered security offering:
“On April 1, 2021, the Company issued to each of Chen Xia Ling, Ren Fu An, and Yang Ke 1,000,000 shares of the Company’s Common Stock at a price of $1.25 per share for aggregate gross proceeds of $3,750,000 (together, the “Offering”)… Additionally, Beijing Zhengqian Shenshi Technology Co. Ltd., the placement agent for the Offering… the proceeds of the Offering are being used for general working capital purposes.”
Moxian stock currently trades around $11.25, representing a $30 million gain for the private investors. Those gains may not last long.
What to Read
“How This Democratic Senator’s Son Made $100 Million In Stocks And Why He Fled To Low Tax Florida” (Forbes)
“In the last ten years, hedge fund investor Adam Wyden made his investors 11 times richer by uncovering hidden stock gems. His biggest worry? That his Democratic Senator father will tax his gains to death…”
“A Culture of Fear at the Firm That Manages Bill Gates’s Fortune” (NYT)
“At least four employees at the firm, Cascade Investment, complained to Mr. Gates about Michael Larson, his longtime money manager.”
Tweets of the Week
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