- This week we have not registered any new major short calls.
- While there are no new reports, we have seen many updates to ongoing campaigns. We focus on Fuzzy's campaign against an allegedly dubious fitness chain which is borrowing money to buy back its own stock. We also write about the latest APLD developments which still suggest serious problems with corporate governance. We focus on Viceroy and their back and forth with Hexagon.
- Lastly, we are tracking the most recent stock price gyrations at several previous targets. We focus on a questionable SaaS company, a reversal of share price action at a tech company and we share the latest price action in a robotics company.
Save time and ask us for independent short thesis verification. Get our custom support. Contact Breakout Point!
Bits and Pieces
- Vindication for Hindenburg Research:
Billionaire investor slashes dividend and revamps strategy after Hindenburg attack
Hedge funds lose $6bn betting against cruise lines and hotels (with Breakout Point’s data via FT)
“Analysing a company's economic prospects has taken a backseat to watching Reddit message boards and options expiries” via Third Point’s letter
Bleecker believes their CACC thesis is playing out, but the stock is refusing to move in the right direction. The shares are up 17% since the report from early 2023.
$CACC reported an absolutely atrocious second quarter today.
— Bleecker Street Research (@Bleecker__St) August 2, 2023
GAAP EPS of $1.69 (down 79% y/y), vs estimates of $8.18 and our published estimate of $2.93 for Q2'23.
We argued in our report that CACC was under-reserved, and this increase in provisions addresses some of that.
Iceberg gets another validation for their EOSE thesis. The stock is down 48% so far from the time the activist re-initiated the short.
$EOSE sued for misrepresenting backlog in Bridgelink deals pic.twitter.com/P4zUepmWFe
— Iceberg Research (@IcebergResear) August 2, 2023
Scorpion provided an update on HRMY after the biotech provided Q2 numbers. The activist sees further downside as they do not believe the company is somehow turning around. The stock is down 21% since the report in March.
Our thoughts on $HRMY Harmony Biosciences Q2 results - a large revenue miss and signs of a one-trick pony struggling to keep up with estimates.
— Scorpion Capital (@ScorpionFund) August 1, 2023
The market appears to be slowly figuring out why the CEO abruptly left in Jan - and seems to be seeing through the new buyback ploy,…
Big Movers
This week we have seen several stocks move in the right direction for the short-sellers. One of the biggest movers in the right direction was the newest campaign targeting Zoominfo (ZI), which plunged 27% in the past five days. This SaaS company was targeted by Wolfpack Research due to allegations of bad corporate governance.
Most importantly, the report believed the company relies on purchasing data from a dubious entity which might have stolen the information. ZI is then passing the data through an entity which acts as a front for the dubious entity. This apparently puts into question how clean and legal data ZI's customers are using.
It seems the thesis is now in full swing as the company showcased challenging Q2 numbers which had many traders sell the stock. Mainly, the company cut their full-year guidance and talked about a tough revenue outlook. Twitter traders mostly agree with the market direction. Some were surprised as they thought the bad news was priced in, but others are saying that the company is unlikely to find a quick way out of this. Wolfpack did not comment on the developments. The stock is now down 54% since the initial report.
Another stock that went in the right direction for short-sellers was Vicor (VICR) which is down 26% in the past five days. It was Akram's Razor who targeted this tech company due to allegations of overvaluation.
Most importantly, the report believed the stock had enjoyed a pop due to the recent AI craze and Nvidia rally, but in reality, the company stands to lose out in the AI race. Their business has been eroded over the years as their technology edge apparently does not stand out anymore as it did in the early days.
VICR has done a significant reversal. It first climbed up on the back of what seemed like positive earnings, only to then fall sharply after Twitter traders started to discuss whether VICR's report was as positive as it seemed, given the business developments outside of the company in the competitive space. Akram still did not provide any news. Despite the recent downturn, the shares are up over 35% since the initial report at the end of June.
On the other side of the tracks, we saw several stocks going against short-sellers in a major way. One of the biggest movers was Symbotic (SYM). This robotics company is up 37% in the past week. It was NINGI who targeted SYM due to allegations of dubious product and questionable corporate governance.
Most importantly, the report believed the company's main contract with Walmart is unlikely to yield much value for shareholders and is also apparently at risk of showing that SYM's product will continue to be unprofitable. SYM allegedly has little expertise in delivering such a significant contract as refitting WMT's centers with their robotics. SYM had to hire third parties to manage the process, which will significantly lower the revenues and margins for SYM despite SYM touting a $12bn price tag for the contract. SYM products were never used at scale, and the company managed to sell only a few systems in the past 10 years.
The market decided to prop up the shares after Q2 data which were seemingly positive. However, NINGI believes nothing has changed, and the same red flags are still present.
Even on an adjusted EBITDA-basis $SYM is not making money but the company added $11bn of new backlog from a JV that it created...the remaining performance obligations are $4bn bigger than the actual contract...btw...#Greenbox was incorporated 10 days ago and has ZERO customers... pic.twitter.com/MZ5Yg7dDXo
— NINGI RESEARCH (@NingiResearch) July 31, 2023
The stock is now up over 38% since the initial report.
Smaller updates
This week was perhaps defined by a bit of the summer lull that might be going on in the activist short-selling space. However, this lull is mainly connected to new reports. The activists do not stop commenting on ongoing reports. Perhaps the first note we would want to raise is from Fuzzy Panda, who shared a whole thread on XPOF's quarterly earnings. The activist targeted this fitness company due to allegations of dubious corporate governance and a broken business model.
Most importantly, the report believes the company's founder has several red flags in his corporate history. He was apparently connected to a penny stock which used Bangkok boiler rooms to try and increase the share price. He was also sued several times due to fraudulent allegations, and many people have called him a crook.
It seems like the quarterly conference call played right into Fuzzy's hand, according to some of the tweets below.
$XPOF - "Is it a lie or not?" - Q2 CC edition
— FuzzyPandaPA (@FuzzyPandaPA) August 3, 2023
As we wait for our programing to begin. Here is a Brainteaser for you:
Why does a company that is supposed to generate lots & lots of cash need to BORROW more money to do a share buy-back?
1/
However, the market does not seem to agree. The stock was actually up in the pre-market on Friday after the release got out. Twitter traders argued that Fuzzy is discounting several strong fundamentals. There was even a podcast episode released which tried to counter the bearish thesis.
Podcast #184 is up! Zack Buckley returns for an update on $XPOFhttps://t.co/IOg217fWc5
— Yet Another Value Empire (@YetAnotherValue) August 2, 2023
That being said, it will be interesting to track the campaign going forward, especially because of Fuzzy's claims about how the founder of the company behaves. The stock is now down 17% since Fuzzy talked about it in June. It has staged somewhat of a rebound since the report which initially pushed the shares down by almost 40%.
We would like to also highlight the newest developments around Applied Digital (APLD). This stock has been written about by several activists. Most recently, The Friendly Bear launched a whole campaign against the datacenter company due to allegations of dubious corporate governance.
Most importantly, the report talks about APLD's dealings with RILY and how the investment bank is allegedly controlling managerial decisions to the detriment of APLD's shareholders. One example is APLD's decision to pay down debt from RILY ahead of maturity at a time when RILY needed cash for an acquisition.
The stock is now down almost 20% since this report at the end of July and it seems the red flags are not going anywhere. The Friendly Bear wrote a thread on APLD's 10k which further supported the initial claims such as undisclosed related-party transactions.
Interesting developments in $APLD 10-K ... new related party disclosure that is still misleading. Jason Zhang (who allegedly runs Sai Computing and was on BOD) set up deals w/ his biz partners in a secret undisclosed hedge fund making much of $APLD cryptomining rev related party pic.twitter.com/l6cTLq0NXc
— The Friendly Bear (@FriendlyBearSA) August 3, 2023
The company also apparently walked back of their commentary about the fundamentals and APLD will apparently need to raise cash soon.
As for the 26k H100 purchase, that has been quietly walked back. It turns out $APLD took financing for $41mm after quarter close for only 1024 H100 GPUs. And Character gave them only a 22.5mm prepayment. They are going to need an astronomical sum of cash soon to grow pic.twitter.com/ydtPtDlw8E
— The Friendly Bear (@FriendlyBearSA) August 3, 2023
Last but not least, we would like to share a smaller update on Hexagon (HEXAB). Viceroy went out on Twitter to talk about Hexagon's response to their allegations. The activist believes the key thesis still holds as per below.
Hexagon insists that Divergent only started having discussions other Series D investors, including Greenbridge, in 2023.
— Viceroy (@viceroyresearch) August 2, 2023
Blackbird, the Greenbridge investment vehicle specifically made to invest in Divergent, was created in Nov 2022, prior to $HEXAB's investment! This is fraud. pic.twitter.com/tjyDmcWw8m
They also questioned Hexagon's disclaimer which is unusual and apparently is further showcasing serious lapses in corporate governance.
Viceroy believe disclaimers are a fundamental part of business. There are many used for forward-looking statements, opinions & projections. The following is a slap in the face for minority shareholders p.16 of Hexagon response. Legal can't have been comfortable! 1/2 $HEXABpic.twitter.com/8cZNo9xldo
— Viceroy (@viceroyresearch) August 2, 2023
Despite the back and forth, the stock is not moving much. However, it remains down over 21% in the past month.
FAQ | Q: Can I publish parts of the above data and analytics in an article? A: As long as you reference our work - yes, you can.
FAQ | Q: Could you provide more related data and analytics? A: Sure, contact us, and we'll try to help as soon as possible.
* Note: Presented data and analytics is as of available on 2023-07-28 UTC 20:00.
The services and any information provided by Breakout Point or on the Breakout Point website shall not be or construed to be any advice, guidance or recommendation to take, or not to take, any actions or decisions in relation to any investment, divestment or the purchase or sale of any assets, shares, participations or any securities of any kind. Any information obtained through Breakout Point and its services should never be used as a substitute for financial or other professional advice. Any decisions based on, or taken by use of, information obtained through Breakout Point and by its services are entirely at own risk.