The Bear Cave #96
New Activist Reports, Recent Resignations, and Tweets of the Week
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New Activist Reports
Muddy Waters Research published on KE Holdings (NYSE: BEKE — $23.1 billion), a Chinese online real estate broker. Muddy Waters compared the company to Luckin Coffee as “a real business with significant amounts of fraud.” Muddy Waters found inconsistencies in reported transaction volume and claimed the company is overstating commission revenue by approximately ~77–96% with sham acquisitions and “ghost stores” – stores that appeared active online, but were nonexistent when visited by investigators. The company said it would conduct an internal review following the report and its shares are down 40% since its August 2020 IPO.
Kerrisdale Capital published on Meta Materials (NASDAQ: MMAT — $813 million), a photonics company that went public through a reverse merger with a defunct Canadian mining company last year. Kerrisdale said that the “business is comprised of a whole lot of nothing: no real revenue, no promising technologies, undeveloped products, and no track record of achievement.”
Viceroy Research published on S&T AG (XTRA: SANT — EUR975 million), an Austria-based roll-up of IT services. Viceroy alleged the company uses off-balance sheet structures to conceal bad assets and highlighted the company acquires many of its assets out of liquidation. Viceroy wrote,
“Analysis of individual subsidiary performance shows flatlining and negative growth due to frauds & federal raids, insolvency, security breaches, and general operational decline.”
The stock fell 25% this week following Viceroy’s report.
Bonitas Research published on Agrify (NASDAQ: AGFY — $224 million), a “fully integrated, data-driven, evidence-based, AI-powered” company that sells indoor farming units to grow cannabis. The company IPO’d in January 2020 and gained attention after signing a number of partnerships. Bonitas is skeptical and wrote,
“We believe that Agrify created artificial demand for its product by financing undisclosed company insiders to act as independent customers… Five of [Agrify’s] eight customer announcements in 2021 are either with undisclosed Company insiders or with unlicensed unproven operators.”
Agrify’s CFO resigned last month and the new audit chair has a prior relationship with the CEO. The company reported $40 million in revenue over the last twelve months; however, Bonitas concluded: “we suspect Agrify’s actual revenues are significantly less than what is reported to investors which is why we are short Agrify and think that its stock is going lower.”
Sumerian Research published a Twitter thread on Focus Universal (NASDAQ: FCUV — $519 million):
White Diamond Research published on authID (NASDAQ: AUID — $388 million), an identity verification company. White Diamond highlighted that the company has less than three million in revenue and alleged that the company’s only identity-SAAS customer may be fake because the CEO appears to professionally use a Gmail address. In addition, White Diamond found that the company paid the former COO of MoviePass, a stock promotion that ended in bankruptcy, a $500,000 consulting fee.
Hedge Fund Analyst Christmas List
This Thursday at 10:30am, The Bear Cave is publishing a “Hedge Fund Analyst Christmas List” of the best free and paid resources for professional investors. In particular, we are looking to highlight off-the-beaten-path niche resources that provide overwhelming value. If you know of one, please hit reply and let us know!
Recent Resignations
Notable executive departures disclosed in the past week include:
CFO of Eos Energy Enterprises (NASDAQ: EOSE — $430 million) informed the company “of his intention to resign” after one and a half years. The company went public via SPAC in November 2020 and its COO previously resigned in October after an eight-month tenure.
CFO of Camden National (NASDAQ: CAC — $657 million) “notified the Company of his resignation” after a little under two years. The company is audited by RSM LLP.
CFO of CIRCOR International (NYSE: CIR — $516 million) resigned after less than two years “in order to pursue an external opportunity.” The company has had four different CFOs in the last five years and switched auditors in June 2020.
CFO of Altimmune (NASDAQ: ALT — $372 million) “is leaving the Company in order to pursue other opportunities” after two and a half years.
CFO of TPI Composites (NASDAQ: TPIC — $606 million) resigned after a little over two and a half years. The company’s Chief Commercial Officer also resigned after about one and a half years.
CFO of Purple Innovation (NASDAQ: PRPL — $786 million) resigned “to pursue other interests” after a little over three years. The company went public via SPAC in 2018.
COO of Jones Lang LaSalle (NYSE: JLL — $12.6 billion) “will be leaving the Company” after about seven months. The company has also had four different CFOs in the last five years.
Chief Accounting Officer of 8x8 Inc (NYSE: EGHT — $1.97 billion) resigned after a little over a year. The company has had three different CFOs over the last five years and is audited by Moss Adams LLP.
Chief Compliance Officer of Halozyme Therapeutics (NASDAQ: HALO — $5.42 billion) resigned “to pursue another opportunity” after two years.
Data for this section is provided by InsiderScore.com
What to Read
“When Companies Fire Their Auditors, Timing Is Clue to Future Trouble” (WSJ)
“Most auditor changes happen early in the financial year, generally in the 30 days after the filing of the annual report. That is when companies typically choose their auditor for the new financial year. After that 30-day window, however, the chances of future accounting problems start to increase, according to the research.”
“Amazon driver was warned she’d be fired for returning with packages during a tornado” (The Verge)
“If you decide to come back, that choice is yours. But I can tell you it won’t be viewed as for your own safety.”
“Family Business Deals Help Fuel Carvana’s Explosive Growth” (WSJ)
“Online used-car seller says it will keep striking new deals with companies controlled by CEO’s father, Carvana’s largest shareholder”
Tweets of the Week
Until Thursday,
The Bear Cave