The Bear Cave #89

New Activist Reports, Recent Resignations, and Tweets of the Week

Oct 31, 2021

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New Activist Reports

Grizzly Research published on MP Materials Corp (NYSE: MP — $6.02 billion), a rare earth elements mining company that went public through one of Chamath Palihapitiya’s SPACs in November 2020. Grizzly Research alleged that the company is the second iteration of a previously bankrupted mining project and highlighted that a related party that accounts for 99% of the company’s revenue has ties to the Chinese government. In addition, the management team has limited mining experience and has sold close to $356 million of stock over the last year.

Spruce Point Capital published a “strong sell opinion” on Heska (NASDAQ: HSKA — $2.39 billion), a pet healthcare diagnostics company. Spruce Point claimed that Heska’s management “has materially embellished Heska’s market share” and alleged the company pivoted to low-quality acquisitions to cover up problems in the company’s core business. Spruce Point also highlighted governance concerns such as the CEO’s two children working at Piper Sandler, which served as Heska’s underwriter and has an “overweight” rating.

Viceroy Research published a brief note on both PagSeguro Digital (NYSE: PAGS — $11.9 billion) and StoneCo (NASDAQ: STNE — $10.5 billion), two Brazilian payments processors. Viceroy claimed the companies rely on PAX Global Technology Limited, which was recently raided by the FBI. Viceroy wrote,

“We expect PagSeguro to be subject to significant regulatory action and scrutiny, with the clear possibility of legal action against the company by various counterparties.”

J Capital Research published on Vulcan Energy Resources Limited (ASX: VUL — AUD$1.55 billion), “a wannabe lithium miner that reversed into an Australian copper miner.” J Capital Research highlighted that the company’s stock is up ~8,000% over the last two years based on optimistic assumptions from consultants that were acquired by the company or owned by company management. J Capital also called the company’s flagship German lithium mine a “non-starter.”

Vulcan shares fell 17% on Friday after coming off a trading halt. J Capital Research’s co-founder, Tim Murray, also did a Zer0esTv interview about the company.

Iceberg Research tweeted critically on Digital World Acquisition Corp (NASDAQ: DWAC — $2.19 billion):

Iceberg Research @IcebergResear

We are short $DWAC. Now that initial excitement has passed, we see only risks for investors in near future. Based on Trump's track record, at current price, renegotiation is likely to keep more of the merged company for him.

White Diamond Research published on Momentus (NASDA: MNTS — $861 million), a pre-revenue outer space infrastructure company that merged with a SPAC in August. White Diamond wrote that the company’s water-based propellant technology “doesn’t work” and highlighted that the SPAC that took Momentus public originally was targeting a deal in the cannabis industry. Moreover, the SEC has sued the company’s founder and ex-CEO, Mikhail Kokorich, over allegations of fraud. In June, Mr. Kokorich sold all his Momentus shares back to the company for $50 million.

Recent Resignations

Notable executive departures disclosed in the past week include:

CFO of Epizyme (NASDAQ: EPZM — $429 million) resigned after less than four months on the job “to pursue other business opportunities.” The company has had five different CFOs over the last five years.
CFO of Orion Engineered Carbons SA (NYSE: OEC — $1.14 billion) resigned after two years “effective immediately, to pursue another opportunity.”
CEO of Navigator Holdings (NYSE: NVGS — $465 million) resigned after a little over two years.
COO of GameStop (NYSE: GME — $14.0 billion) resigned after nine months.
A director of Berkshire Hills Bancorp (NYSE: BHLB — $1.33 billion) resigned after less than six months.
Chairman of Shattuck Labs (NASDAQ: STTK — $813 million) resigned as chairman of the board after less than seven months. The company IPO’d in October 2020.
An audit committee member of Peloton (NASDAQ: PTON — $27.7 billion) resigned the same day the company filed its proxy statement

Data for this section is provided by InsiderScore.com

What to Read

“Burr’s Brother-in-Law Called Stock Broker, One Minute After Getting Off Phone With Senator” (ProPublica)

"After Sen. Richard Burr of North Carolina dumped more than $1.6 million in stock in February 2020, a week before the coronavirus market crash, he called his brother-in-law... The very next minute, Burr’s brother-in-law called his broker."

“EY and Wirecard: anatomy of a flawed audit” (FT)

“The FT has scrutinized hundreds of pages of internal documents and emails and interviewed more than a dozen people at the heart of the failed audit…”

“A Farewell to Readers, With Hope” (NYT)

“Talent is universal, even if opportunity is not. The world’s greatest untapped resource is the vast potential of people who are not fully nurtured or educated — a reminder of how much we stand to gain if we only make better investments in human capital.”