🐻The Bear Cave (Issue #4)🐻

INMD, XP, NEWT, CGX, CINE, JKS, AXP, BCS, BA, NWL & More

Mar 09, 2020

Welcome to the fourth 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

Marcus Aurelius Research released a blistering new short report on Israel-based medical device company, InMode (NASDAQ: INMD — $1.04 billion). Marcus Aurelius Research alleged:

“A broad pattern of undisclosed lawsuits, apparent out of court settlements, and online reviews we obtained allege that patients have suffered severe burns, permanent scarring, and even nerve damage from treatments conducted with INMD products. Perhaps out of concern for the IPO prospects, INMD’s executives have allegedly concealed the existence of these adverse events by failing to report them to the FDA as required by law.”

The report continues:

“Our internal analysis shows that 37 of the 43 studies we could find on InMode’s website were published by doctors who have either received payments from INMD, hold stock in INMD, or are INMD employees…”

InMode stock is down about 30% over the last month.

The Winkler Group released its first short report on Brazilian asset manager XP Inc (NASDAQ: XP — $17.1 billion). The report claims XP’s “Internal Audits Conflict With Its IPO Prospectus” and that “XP restated EPS figures multiple times just ahead of its IPO.”

Copperfield Research released a critical report on Newtek Business Services (NASDAQ: NEWT — $362 million). Copperfield alleges,

“[Newtek] has exploited its Business Development Company (BDC) structure to dramatically misrepresent the health and profitability of its business… defrauds the Small Business Administration (SBA), a taxpayer-backed government agency, misrepresents and overstates income, [and] pays dividends it does not earn…”

Hindenburg Research announced it was short Canadian cinema company, Cineplex (TSE: CGX — CAD$2.01 billion):

Hindenburg Research @HindenburgRes

We are short $CGX, a large Canadian cinema operator in the midst of an acquisition by cinema operator $CINE in an all-cash $34 deal that we think could fall apart or be reduced in price materially. $CGX trades at $32.48, only a 4.5% discount to the deal price. (1/5)

Along a similar vein, Bucephalus Research released a critical video on Cineworld (LON: CINE — GBP$1.44 billion).

Bonitas Research announced it was short JinkoSolar (NYSE: JKS — $3.93 billion). The company issued a brief response.

Yours truly was featured in Stanford’s student newspaper for reporting on Care.com. I also enjoyed going on Jan Svenda’s podcast to talk about it.

What to Watch

Could American Express be the next Wells Fargo?

The Wall Street Journal released a new report on American Express “AmEx Staff Misled Small-Business Owners to Boost Card Sign-Ups.” The article states:

“[AmEx] salespeople have misrepresented card rewards and fees, checked credit reports without consent and, in some cases, issued cards that weren’t sought, current and former employees said.”

In 2018, the Wall Street Journal reported a similar critical story on American Express, “American Express Gave Small Businesses One Rate, Then Secretly Raised It.” The article stated,

“AmEx’s foreign-exchange international payments department routinely increased conversion rates without notifying customers in a bid to boost revenue and employee commissions, the people said. The practice, widespread within the forex department, was occurring until early this year and dates back to at least 2004.”

After the foreign-exchange pricing probe, AmEx reimbursed $1.6 million to forex customers and terminated 10 employees.

“U.K. Investigators Examine Visits by Barclays CEO Jes Staley to Jeffrey Epstein’s Island” (WSJ)

“In a statement, a Barclays spokesman said Mr. Staley visited [Epstein’s] island, Little St. James, twice, both times with his wife. Neither the bank nor Mr. Staley had previously acknowledged the visits publicly.”

“It’s More Than I Imagined: Boeing’s New C.E.O. Confronts Its Challenges” (NYT)

“It’s more than I imagined it would be, honestly,” Mr. Calhoun said, describing the problems he is confronting. “And it speaks to the weaknesses of our leadership.”

SEC News

Newell Brands Is Investigated by SEC (WSJ)

“The Securities and Exchange Commission is investigating sales and accounting practices at Newell Brands, the consumer-products giant said… One focus of the probe, Newell said, is its treatment of goodwill—the premium a company pays when it buys another for more than the value of its net assets.”

The SEC’s Continued Focus on Non-GAAP Financial Metrics (New York Law Journal)