The Bear Cave (Issue #1🎉🎉)
LK, Aurelius Equity, MTCH, IAC, DBX, CYDY, YEXT, BE, NMC & More
“Never underestimate the man who overestimates himself”
Welcome to the inaugural issue of The Bear Cave! Your weekly source of what’s going on in the short world. Feedback is welcome and if you like this newsletter please share with friends and encourage them to sign up.
New Activist Reports
Muddy Waters tweeted out an anonymous short report on the Chinese coffee chain Luckin Coffee (NASDAQ: LK — $9.6 billion market cap). The 89-page report alleged:
“Right after its $645 million IPO, the Company evolved into a fraud by fabricating financial and operating numbers starting in 3rd quarter 2019. It delivered a set of results that showcased a dramatic business inflection point and sent its stock price up over 160% in a little over 2 months.”
After publication, Citron tweeted it was long Luckin and J Capital Research countered with a critical note.
New activist Ontake Research published on the German investment manager Aurelius Equity Opportunities (Germany: AR4 — $1.03 billion market cap). Ontake alleged Aurelius Equity overvalued its holdings and estimated Aurelius Equity’s true NAV is around 1 million euros. If that name sounds familiar you may be remembering Gotham City Research’s March 2017 report on Aurelius Equity that also alleged overstated NAV. Aurelius responded by filing a criminal complaint in Germany against Ontake and released a 14-page response.
Kerrisdale Capital published two short reports, one on Match Group and IAC, and another on Principia Biopharma (NASDAQ: PRNB—$2.1 billion).
Spruce Point published on DropBox (NASDAQ: DBX — $7.7 billion).
Culper Research, an emerging activist, published on microcap CytoDyn (OTC: CYDY—$500 million).
Yours truly published on Yext (NYSE: YEXT — $1.9 billion)
What’s Been Working
Bloom Energy (NYSE: BE) a $1.3 billion clean energy company based in San Jose, announced it was restating four years of financials after Bloom determined that its previously issued financial statements “should no longer be relied upon due to an error in accounting for the Company’s Managed Services Agreements.” The restatement will lower revenue by around $170 million and increase net losses by around $60 million.
This restatement comes after Hindenburg Research published a detailed critical report into Bloom’s “tricky accounting.” You can read Hindenburg’s original September 2019 report here. Forbes recently published a great reinvestigation into Bloom as well.
NMC Health (LSE: NMC — $1.7 billion) made some major announcements recently. First, the company disclosed its founder and biggest shareholders may have incorrectly reported their stakes in the company for years. Then, the founder/chairman and vice chairman both resigned. This comes two months after Muddy Waters published a critical report.
Polarityte Inc (NASDAQ: PTE — $46 million) is down 88% over the last twelve months. Credit to Cliffside Research, Hindenburg Research, Citron Research, and Et al BioCapital for predicting the fall.
SEC News
SEC Urged to Seek More Disclosure When Investors Tout Short Bets
“A group of law professors is asking the U.S. Securities and Exchange Commission to require that traders who publicize their intent to drive down a company’s share price be more transparent when backing off those bets to avoid market losses….”
SEC Slams Hill International (NYSE: HIL — $192 million)
The SEC “charged Hill International, Inc., and two of its former executives for engaging in fraudulent accounting practices and failing to maintain accurate books and records, which led Hill to artificially boost net earnings from approximately May 2014 to March 2017.” (Read the Complaint)
SEC Settles with Cannell Capital
Cannell Capital settled with the SEC “for not having policies and procedures reasonably designed to prevent the misuse of material nonpublic information.”
Until next week,
The Bear Cave
(Feedback Welcome, Forwarding & Sharing Is Very Appreciated)
Contact: edorsey@stanford.edu / (718) 873-2362 / @StockJabber