📉The Bear Cave (Issue #3)📉

ALLK, WWW, SDGR, GSX, WTC, MAT & More

Mar 02, 2020

Welcome to the third 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 announced it was short biotech company Allakos (NASDAQ: ALLK — $3.04 billion) because “a new, undisclosed Phase 1 raises troubling concerns.” In December, Seligman Investments posted a 215-slide presentation criticizing Allakos’s phase 2 trial and concluded,

“Allakos appears to have a pattern of not playing by the rules.”

Shares are down about 50% since Seligman Investments’ December report.

Grizzly Research published on Chinese online education company GSX Techedu (NYSE: GSX — $9.68 billion). Grizzly Research suggested, “the company has been drastically overstating its profitability in its US public filings” and pointed out:

“GSX’s former CFO left in a rush during the 2019 IPO, and the current CFO was formerly involved in a Chinese online education company that also has numerous allegations of being a scam.” Read the report here.

Black Stork Research published on footware company Wolverine Worldwide (NYSE: WWW — $2.15 billion). In addition to raising concerns about accounting irregularities, Black Stork Research wrote, “We see a high chance of missing Q4 revenue/earnings estimates, an impairment at Sperry and a weak 2020 guidance…”

Citron Research reaffirmed its long thesis on Schrödinger (SDGR — $2.32 Billion) and suggested it could benefit from helping solve Coronavirus.

JCap Research released an update on its WiseTech short (ASX: WTC — AUD$5.42 billion).

And Hindenburg Research promised to release a big new report this week:

Hindenburg Research @HindenburgRes

Next week we are releasing a report on a company that we believe has engaged in an egregious insider enrichment scheme. We have accumulated overwhelming evidence from all over the globe as part of our investigation. We think the equity will ultimately be rendered worthless.

SEC NEWS

SEC Investigating Mattel’s Accounting (NASDAQ: MAT — $4.09 billion)

“The maker of Hot Wheels cars and Barbie dolls on Tuesday said that both the Securities and Exchange Commission and attorneys from the Southern District of New York have begun to look into the company’s investigation that resulted in plans to change its chief financial officer and restated earnings.”

SEC Charges South Carolina Companies, Executives in Failed Nuclear Project Case

“Scana Corp. and two of its former senior executives allegedly repeatedly made false and misleading statements to investors, regulators and consumers between 2015 and 2017 about the status of the $9 billion nuclear project that ultimately failed, the SEC said in a complaint filed in a federal court in South Carolina.” (Read the complaint)

Actor Steven Seagal charged with unlawfully touting digital asset offering

“The Securities and Exchange Commission today announced settled charges against actor Steven Seagal for failing to disclose payments he received for promoting an investment in an initial coin offering (ICO) conducted by Bitcoiin2Gen (B2G).”

SEC Rejects Controversial ‘Speed Bump’ Proposal

“Speed bumps work by forcing traders to wait a fraction of a second before their orders to buy or sell stocks are executed at an exchange. That can trip up certain ultrafast strategies that depend on getting trades executed as quickly as possible…”