Commentary

We remain short shares of Carvana (CVNA), a poorly capitalized, growth challenged, auto retailer now valued at an absurd $19 billion (42x EV/2024E EBITDA) following last Friday’s 30%+ pop in share price. Prior to this move Carvana’s valuation was already stretched – now, its share price is so ridiculous that it doesn’t just trade at […]

We sent a letter today to C3.ai’s signing audit partner and the head of the U.S. audit & assurance practice at Deloitte & Touche LLP regarding serious accounting and disclosure issues we have identified in C3.ai’s SEC public financial statements. Our letter can be found here.

C3’s fiscal year ends on April 30, and we have asked Deloitte to review our letter in anticipation of its upcoming work conducting the company’s year-end audit. In the letter, we discuss:

• The highly conspicuous growth in unbilled receivables to levels we’ve never before seen in software companies
• Opaque, confusing and highly concerning disclosures and financials related to the company’s related party and very large customer, Baker Hughes
• Efforts to inflate gross profit margins by reclassifying costs of revenue as research and development expenses
• Classification of significant revenue as subscription revenue that in actuality is services- or consulting-oriented revenue
• Significant turnover in chief financial officers, and the appointment of successively less qualified CFOs over time

We hope that our letter will bring to light various highly misleading accounting methodologies that we believe the company utilizes in order to inflate revenue and certain profit metrics, and to conceal deterioration in its underlying business.

In our original report on Principia Biopharma, we emphasized that BTK inhibitors have failed over and over in autoimmune diseases, which we attribute to a basic problem with their mechanism of action: their main effect is to impair the production of new B-cell lineages, leaving the previously established B-cell populations that cause autoimmunity largely unscathed. Alas, Sanofi – the French pharma firm that licensed Principia’s BTK inhibitor SAR442168 for use in multiple sclerosis – doesn’t seem to have gotten the memo. During Sanofi’s recent earnings call, its global head of R&D rattled off what he views as the drug’s key virtues, all the while perpetuating several myths and misconceptions. Here we respond point to point to Sanofi’s paean to SAR442168, explaining why we remain unimpressed.

Read our full update here.

We are short shares of Principia Biopharma. Last week, Sanofi, the large pharma company that has licensed Principia’s BTK inhibitor SAR442168 for use in multiple sclerosis, announced that the drug met the primary endpoint of its Phase 2 trial. In our original report…

• CMS provides granular detail on the building blocks for reimbursement calculations. The details provide investors with a roadmap to evaluate the ultimate reimbursement rate for the Zio procedures.
• An analysis of iRhythm’s allowance for doubtful accounts implies that the company may be stretching to exceed revenue expectations, and is potentially…

This post is part of a series of additional research that we conducted following our initial report on ViaSat. Please visit factsaboutviasat.com to access all of our research on ViaSat.

ViaSat’s aviation business is a source of market interest and bullishness.  Much like shareholder enthusiasm for ViaSat’s residential broadband business, we believe much of this optimism is misplaced.

Until ViaSat-3 Asia is in service (likely beyond 2022), ViaSat lacks global coverage. This is a non-starter for many international airlines.  If and when all three ViaSat-3 satellites are…

This post is part of a series of additional research that we conducted following our initial report on ViaSat. Please visit factsaboutviasat.com to access all of our research on ViaSat.

A key flaw in ViaSat’s technology path and business model is the lack of backward compatibility.  ViaSat’s newest satellite, upon which the company’s growth prospects hinge, cannot communicate with its current subscribers. Currently installed aviation equipment is also not compatible with ViaSat-2, which is why management recently cited a “pause” in installation…

We remain short shares of Straight Path Communications. As we argued earlier this month, Straight Path is dramatically overvalued relative to the most appropriate comparable transaction: Verizon’s potential future acquisition of XO Holdings’ millimeter-wave (mmWave) spectrum. Reaching this conclusion does not require any particular skepticism about the prospects of mmWave 5G. However, some investors – apparently taking marketing fluff at…

Today we’re announcing that we sent what’s called a Form 3949-A (Information Referral) to the IRS explaining why we believe DISH is violating tax law by taking approximately a billion dollars per year in tax deductions that it isn’t eligible for. These tax deductions stem from DISH’s amortization of the cost of its spectrum purchases. Some analysts value the cumulative savings over time at $6 per share – roughly 13% of DISH’s current equity value. However,…

Following our report on Sage Therapeutics, six sell-side reports were published defending Sage Therapeutics and insisting that the price decline following our initial report represented a buying opportunity for the discerning investor.  The points made in each report were similar, and we believe the two key points worth discussing are the placebo response rate assumption and the scientific rationale for using SAGE-547…

In the wake of our report on ClubCorp Holdings, several equity-research analysts have attempted to refute our arguments. Their notes focused on four major themes:

• The extent and nature of ClubCorp’s capital expenditures
• The escheatment risk and tax implications of the company’s membership deposit liability…