April is an exciting month at Hudson Labs as we prepare our product launch.
To celebrate, we wanted to share some of what we’ve been working on. Here are a few case studies where our algorithms identified risk indicators at companies which were subsequently the subject of activist reports and, in many cases, encountered problems like financial statement restatement and litigation.
fuboTV Inc (FUBO)
May 29, 2020:
Hudson Labs algorithms assigned a Risk Score of 87 (high risk) based on FUBO’s December 31, 2019 annual filings, a score considerably higher than the Mid Cap Communication Services sector average of 53.
December 30, 2020:
Kerrisdale Capital published a report challenging FUBO’s valuation, growth prospects, and business model.
March 25, 2021:
FUBO was featured in Hudson Labs' weekly Findings of Interest report, with a continued high risk score. Key disclosures identified by our algorithms included:
FUBO was required to restate certain financial statements for the quarterly periods ended March 31, 2020, June 30, 2020 and for the fiscal year ended December 31, 2019.
FUBO “determined that there have been defects with respect to certain historical corporate transactions, including transactions that were not or may not have been properly approved by our board of directors, transactions that may have breached our organizational documents, or transactions that may not have been adequately documented”.
Kerrisdale Capital is an investment management firm with a research-based approach to long and short investments. Kerrisdale Capital disclosed a short position at time of publication. Their report can be found here.
Ormat Technologies Inc (ORA)
March 2, 2020:
Hudson Labs assigned a Risk Score of 80 (high risk), a score considerably higher than the Mid Cap Utilities average of 51.
Our algorithms highlighted red flags related to stockholder blocks with potential conflicts of interest, cash flow and credit risks including overdue receivables amounts, off-balance sheet risks, and unremediated control weaknesses.
March 1, 2021:
Hindenburg Research published a report alleging “widespread and systemic acts of international corruption”. Less than eight hours after Hindenburg’s report, the company announced the departure of the General Counsel/Chief Compliance Officer and a director.
Hindenburg Research specializes in forensic financial research, and disclosed a short position at time of publication. Their report can be found here.
EHang Holdings Ltd (EH)
April 20, 2020:
Hudson Labs assigned a Risk Score of 80 (high risk), a score considerably higher than the Small Cap Industrials average of 51.
Our algorithms highlighted red flags around governance, potential conflicts of interest with variable interest entities, unusual related party relationships, and material weaknesses in financial controls related to knowledge and experience of accounting and financial reporting personnel.
February 16, 2021:
Wolfpack Research published “EHang: A Stock Promotion Destined to Crash and Burn”, alleging issues with fabricated revenues with the goal of inflating stock price. $EH’s stock price opened at $123.5 on February 16th and closed at $46.30, a drop of more than 60%.
Wolfpack Research is a short-biased activist research firm. Their report can be found here.
Blink Charging Co (BLNK)
April 4, 2020:
Hudson Labs algorithms assigned a Risk Score of 86 (high risk), a score considerably higher than the Small Cap Consumer Cyclical sector average of 50.
Our algorithms highlighted risks associated with internal controls over financial reporting, litigation, and reserve reversals (expense recoveries).
Control deficiencies were identified in journal entries involving estimates and judgments, and in the review of related party transactions.
Litigation against directors and key management personnel, including multiple class action lawsuits, alleging:
Breach of fiduciary duties and corporate waste for unjust enrichment;
False or misleading statements about operation scope, partnerships, and third-party expansion.
Our algorithms also highlighted reversals of prior period inventory impairment (expense recoveries) over multiple product lines increasing profitability.
August 19, 2020:
Culper Research alleged an intentional and vast exaggeration by management of BLNK’s charging network: a plethora of charging stations that were “neglected, abused, non-functional, or otherwise missing”. The article continues, claiming operational issues, overstated or misleading claims by management on network size and manufacturing capabilities, as well as governance issues.
Culper Research specializes in investigative investment research. Their report can be found here (pdf).
Alpine 4 Technologies LTD (ALPP)
June 1, 2020:
Hudson Labs assigned a Risk Score of 81 (high risk), a score considerably higher than the Technology sector average of 58.
Our algorithms highlighted significant related party transactions, material control weaknesses related to lack of segregation of duties, cash flow risks and a bankrupt subsidiary.
Marc 10, 2021:
Grizzly Research published a report opining questionable management, issues with acquisitions, lack of verifiable tangible assets, and lack of activity.
Grizzly Research focuses on providing research insights on publicly traded companies. Their report can be found here.
Wishing you all thorough research and good governance,