The Bear Cave #86
8 New Activist Reports, Recent Resignations, JYNT Twitter Spaces, Tweets of the Week
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New Activist Reports
Grizzly Research published on Peak Fintech Group (OTC: PKKFF — $607 million), a Chinese small-dollar lending platform. Grizzly Research alleged an aggressive stock promotion scheme sent the stock up over 500% and highlighted that the company has used shareholder cash for spurious acquisitions that may be enriching insiders. Grizzly Research wrote,
“PKK’s evolution is questionable at best. The company pivoted from failed, wannabe ‘Find My iPhone’ software, to revenue-less IT services, to a fully impaired e-commerce platform before becoming a ‘hub’ for commercial lending in China.”
Kerrisdale Capital published on Camber Energy (NYSE: CEI — $178 million), a heavily promoted Texas-based oil and gas company. Kerrisdale highlighted that the company’s primary assets are “barely solvent” and encumbered by $100 million+ in debt due within twelve months. In addition, the company has seen shares outstanding go up twenty-fold in the last 18 months and, because of a preferred stock agreement, Kerrisdale estimates that Camber’s true diluted market cap is nearly $1 billion. Kerrisdale highlighted other issues with management and found that the company’s new “ESG clean energy license” was purchased from an SEC-sanctioned family. Kerrisdale also tweeted,
“This one has something for everyone: death-spiral financing, a fake CFO, delinquent filings, fired auditors 3 weeks ago, insolvent energy assets & the saddest family of entrepreneurs in the cleantech vaporware space.”
Camber Energy stock was down about 50% this week.
Scorpion Capital published a 175-slide presentation on Ginkgo Bioworks (NYSE: DNA — $20.2 billion), a synthetic biology company that went public via SPAC in September. Scorpion conducted 21 interviews with former employees and Ginkgo customers and concluded the company relies on related parties for the majority of its revenue, much of which is “non-cash revenue.” For example, private investigators hired by Scorpion found that some customers share a telephone number with Ginkgo and others are located in the same building. Scorpion Capital highlighted that Ginkgo trades at ~166x revenue and described the company as “phantom revenue, a hocus-pocus business model, rampant related-party games, and a decade of colossal failure shoveled into yet another garbage SPAC.”
Scorpion Capital’s founder, Kir Kahlon, also did a 30-minute Zer0es TV interview about the company.
Citron Research also published critically on Ginkgo Bioworks and wrote, “we cannot disagree that the stock will probably be down 80% in short form” and highlighted the company is trading at 5x its September 2019 venture funding valuation.
Bonitas Research published on The Metals Company (NASDAQ: TMC — $801 million), an ocean metal mining exploration company that went public via SPAC in September and has since fallen 65%. Bonitas alleged that the pre-revenue company siphoned $43 million to insiders through a spurious acquisition.
J Capital Research published on Faraday Future (NASDAQ: FFIE — $2.61 billion), an electric vehicle company that went public via SPAC in January. J Capital highlighted that the company’s founder, Jia Yueting, has been “banned for life from being associated with publicly listed companies in China.” J Cap Research noted that the company has not produced a car after being in business for eight years and found that the company removed claims about its vehicle “reservations” earlier this year. Furthermore, one major Faraday Future shareholder, heavily indebted Chinese conglomerate Evergrande, may need to sell its 20% stake in the company because of its financial distress. The borrow rate on Faraday Future stock is currently 148% according to data from iBorrowDesk.
J Capital Research’s founder, Anne Stevenson-Yang, also did a Zer0esTV interview about the company.
Iceberg Research published on Hyzon Motors (NASDAQ: HYZN — $1.48 billion), a zero-revenue hydrogen electric vehicle company that went public via SPAC in July. Iceberg Research built off last week’s report from Blue Orca Research and highlighted that Hyzon’s parent company’s largest customer is in financial distress.
Viceroy Research published on Adler Group SA (ETR: ADJ — EUR1.41 billion), a Luxembourg-based real estate company. Viceroy called the company “a hotbed of fraud” and wrote,
“Adler Group’s modus operandi is to acquire or force mergers with better capitalized companies to then saddle them with debt. Management then channels cash and assets to enrich its friends and associates via undisclosed and blatantly uncommercial related-party transactions, many of which are never intended to be settled in full. Its balance sheet has been artificially inflated to a significant degree, its shares are not investible, and its bonds are almost certain to default with very large impairments.”
Adler stock was down 31% this week.
Twitter user @restrinct shared an anonymous report on Waitr Holdings (NASDAQ: WTRH — $101 million), an online food delivery company that has fallen 90% since its 2018 SPAC merger. Restrinct said the company is in terminal decline and would likely be delisted. Some of the red flags that contributed to the company’s failure include: “a rushed SPAC deal, conflicted Board, toxic financing, excessive leverage with looming maturities, an overpaid CEO, botched M&A, and the results of coming last place in a hypercompetitive market with a capital-intensive model.”'
Twitter Spaces on The Joint (JYNT) Tomorrow
The Bear Cave’s author, Edwin Dorsey, will be hosting a Twitter Spaces to discuss The Bear Cave’s recent report on The Joint (NASDAQ: JYNT — $1.15 billion) and take audience Q&A. Join the live audio event tomorrow at 4pm ET and follow Edwin on Twitter @StockJabber
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Chart Industries (NYSE: GTLS — $6.91 billion) “retired” after seven months on the job. The company has had five different CFOs over the last five years.
CFO of Syndax Pharmaceuticals (NASDAQ: SNDX — $876 million) resigned after a little over one year “in order to pursue another opportunity.”
CEO of Zomedica (NYSE: ZOM — $500 million) “retired” after about one year. The company was previously touted by Carole Baskin of Tiger King.
Chief Revenue Officer of Nutanix (NASDAQ: NTNX — $7.58 billion) resigned after nine months “to pursue other opportunities.”
Data for this section is provided by InsiderScore.com
What to Read
“Idea Brunch with Bill Martin of Raging Capital Ventures” (Sunday’s Idea Brunch)
“My goal when researching a new company is to quickly understand the core business model, key financial metrics, and major fundamental drivers. I typically start with a review of high-level conference presentations and the 10-K. I will also review quarterly conference calls with a focus on the Q&A section – specifically, what kinds of questions are analysts focused on? I try to nail down the 2 or 3 key variables affecting the business and determine whether I have any edge in understanding those variables.
I also like to try to put myself in the shoes of the owner or manager of the business – would I want to own all of the business if I could, would I put 100% of my net worth in the company, what would I do if I were CEO, etc.? If I start getting excited by the answers to those questions, it is worth spending more time on the idea.”
(Reminder: If you are currently a paid subscriber to The Bear Cave, you can get a one-year subscription to Sunday’s Idea Brunch newsletter for free. Just reply “please add me.”)
“Paris Hilton’s Business Empire Is Getting a Makeover” (WSJ)
“Ms. Hilton said she believes media companies in the future will rely less on legacy brands alone and instead lean more on personalities. ‘I believe we are living in the golden age of creators,’ she said. Competition in the influencer space remains fierce.”
“Rent the Runway = a Future Debtor” (PETITION)
“Rent the Runway is a laughably bad business with negative EBITDA and a healthy amount of debt PIK'ing at a solid clip. Its IPO is a cynical dump on the markets while the going is good.”
Tweets of the Week
Until next week,
The Bear Cave