February 8, 2021- Short Seller Hindenburg Research Launches Scathing Attack on Newly Public Clover Health. What Does the Market Think of the Accusations? 

Jeff Bezos Retires as Amazon’s CEO, Passing the Torch to Andy Jassy. Was Bezos the Greatest CEO of All Time?

Payments Firm Payoneer to Go Public Through SPAC FTAC Olympus Acquisition. Did the Market Like the Deal?

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Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.Accelerateshares.com.

Julian Klymochko: Welcome podcast listeners to episode 114 of The Absolute Return Podcast, I am Julian Klymochko. 

Michael Kesslering: And I’m Mike Kesslering. 

Julian Klymochko: Today is a chilly Saturday, February 6, 2021, a few things to chat about happening in the markets this week. 

  • Number one, we wanted to chat about a short seller report, Hindenburg Research. They launched a scathing attack on newly public company, Clover Health. What does the market think of the accusations here? And how did the company respond? 
  • Jeff Bezos retires as Amazon CEO, passing the torch to Andy Jassy. Was Bezos the greatest CEO of all time? 
  • And lastly, payments firm Payoneer to go public through SPAC Ftech Olympus Acquisition. Did the market like this deal? 



Julian Klymochko: But Mike let’s touch on this activist short seller report from Hindenburg Research. I should note that they were actually not even short the stock. They just, I guess, put it out for fun. But nonetheless, they published a report critical of Clover Health, which recently went public just in October through blank check company, Social Capital Hedosophia III. Now a bit about this company, Clover. They sell Medicare backed insurance plans, some details on the recent going public transaction. It was a $3.7 billion dollar deal through a SPAC backed by none other than a Chamath Palihapitiya who’s catching quite a bit of flack here from Hindenburg Research. This SPAC raise is $720 million dollars in April, 2020. Announced the deal six months later, the tie up with Clover. 

Some background on what Chamath got from this deal. He got over 20 million founders shares, basically free shares worth nearly $300 million dollars. So not a bad payday for him for putting this deal together. However, Hindenburg accuses, Chamath of misleading investors regarding Clover prospects and called the company a, quote, “broken business.” And initially they say that Clover Health is under active investigation by the DOJ, Department of Justice, which the company did confirm. Apparently, the DOJ is looking into at least 12 issues, including kickbacks, unsound marketing practices and undisclosed third-party deals. The report did also detail poor reviews from some health practitioners on the quality of the product. But nonetheless Clover did respond to the accusations with a very in-depth rebuttal, which is nice. Too often, you see companies just go after the short seller without actually looking at the substance of their report. So, it’s very nice to check out the 8K that Clover put out, going through kind of line by line of all the accusation, but their stock still drop this week. Down about 8.4% on the news. Mike, what are your thoughts on this interesting research report from Hindenburg? I should touch on what we discussed last week, which is, you know, my thesis was, we wouldn’t really see these much anymore. Just given this whole crew of wall street bets guys, looking to target short sellers, but thus far, they haven’t really gone after a Hindenburg or Clover, trying to cause a short squeeze. They still seem focused on GameStop or should I say games dunk?

Michael Kesslering: Yeah, and I mean, I guess that’s part of it, is Hindenburg is kind of treading pretty carefully here because as you had mentioned, like they don’t hold a short position with Clover. And I think this is really just them doing PR for short sellers everywhere. 

Julian Klymochko: Yeah, that’s a good point.

Michael Kesslering: They mentioned that the goal of this was to show that short sellers do have a major role in exposing fraud and corporate malfeasance. So, I mean, they’re looking to raise the profile of both themselves and I guess earn back some of the profile for the short sellers in general. And I mean, in terms of short sellers, Hindenburg is a pretty decent quality for their short seller reports. I mean, they were responsible for the Nikola short seller report, which was very entertaining.

Julian Klymochko: Yeah, and some details on that one where they called Nikola an intricate fraud built on dozens of lies. And one specifically was where they detailed the Nikola Semi-Truck rolling down a hill and it didn’t even have an engine. There was this rolling due to gravity and not power by its supposedly electric vehicle engine.

Michael Kesslering: That was one of the more entertaining reports in general, not just short reports. That report was absolutely entertaining where, you know, they talked about how they basically just had a rendering group as opposed to actual engineering at Nikola. But back to Clover, I mean, you hit the nail on the head as well as what I really enjoy this situation because Clover actually came back with a solid rebuttal. And then after that, Hindenburg came back with another rebuttal of their own, but it kind of lacked a little bit of me to there wasn’t too much to it on Friday. But really like Clover, they acknowledged the main crux of what Hindenburg was going after them for where these requests for information. 

Julian Klymochko: From the DOJ. 

Michael Kesslering: Yes exactly, from the DOJ and I’m not a lawyer and don’t profess to be an expert on this subject, but I do believe that what this is coming down to is the difference between requests for information and actual accusations of wrongdoing. As I do understand that, you know, they are  highly regulated being a part of Medicare. So, they do receive, at least the company says. They do receive these types of requests, like it’s very normal course business. So, in that sense, I can kind of be on board where they would say, hey, this isn’t material, this doesn’t need to be disclosed to shareholders. Obviously, Hindenburg thinks that there’s more to this. And that’s just a sign that there actually will be charges brought against them. I really don’t know, but I do like the fact that they’re going back and forth and what Hindenburg did say. Part of their goal was, that they thought that Clover wasn’t being transparent. While their actions over the last week have made Clover become more transparent. Now everything’s being discussed out in the open for investors to make a decision. And I mean, given the price reaction of Clover, I mean, it was trading at about just about $14 dollars prior to the short report. Then was trading below $13 dollars for most of Friday before kind of rebounding up to almost $13 dollars. It was trading below $12 dollars and then traded up to almost $13 dollars by the end of the day on Friday. I mean, investors, now it seems are taking into account this information and it doesn’t seem to be a death blow for the company, at least at this point with the current information available, but an interesting situation you know, it’s making things more transparent in the market and it’s an open dialogue between the two.

Julian Klymochko: That’s a good point you make with respect to regulatory investigations. In certain businesses, that’s normal course. I’m not saying this is necessarily the case, but in healthcare it does happen often. One analogous situation would be in technology. I mean, Google and Facebook tremendously successful and profitable, but getting investigated and fined by regulators to the tune of a multiple billions of dollars just seems par for the course in that business. And the other point that you made was hedge funds and short sellers have really been unnecessarily around, justifiably demonized over the past number of months, which in my opinion, doesn’t make sense. Historically, they have been the sheriffs of Wall Street, you know, sniffing out fraud and things of that nature. And it wasn’t too long ago where the movie, The Big Short came out with Christian Bale, Steve Carell, Ryan Gosling, Brad Pitt, and they were heralded as heroes and lionized. So, I didn’t know when that happened. When hedge funds, went from hedge funds short sellers, went from having movies being made about them to retail traders wanting to go after them and blow them up. But nonetheless, this one looking like a PR stunt from Hindenburg. So, investors should note, they don’t necessarily have skin in the game. However, you know, it’s worthwhile reading the report, doing your own due diligence and making your own decision on this one. 



Julian Klymochko: Some big news out of Amazon, Jeff Bezos, who is often regarded as the best or was best CEO in the world. Now he’s stepping down from his executive position at Amazon. So, Bezos, he’s 57, so somewhat surprising, but I guess not so surprising when he’s the richest man in the world, perhaps he’s accomplished everything he wanted to do, on that side of his life. He founded Amazon and in 1994. So, it’s been quite the ride. Turned it into a 1.7 trillion behemoth, the second largest company in the world. So, kudos to him for that massive accomplishment and made himself the richest man in the world in the process. I think he’s worth about $200 billion dollars or so. He pioneered basically two industries in addition to a myriad of others, but mostly online retail, amazon.com, huge seller, as everyone knows, but also cloud storage with their Amazon web services. So, what Bezos is going to do? He’s transitioning to executive chair and passing the reins of the company to his lieutenant, Andy Jassy in Q3 of this year. So, in a few months, but Bezos, he’s not fading away. He said he will stay engaged in important Amazon projects, but we’ll also have more time to focus on the Bezos Earth Fund, his blue origin spaceship company, which he funds to the tune of billions of dollars per year. The Washington Post, which he owns and the Amazon Day One Fund

Some background on the upcoming CEO. Jassy joined Amazon in 1997. So was very early, came to the company just a few years after its founding. And he led Amazon’s web services cloud team since, inception, which was obviously a massive part of Amazon and the key growth driver of Amazon’s financial performance. And in my opinion, and many analyst’s opinion, the majority of Amazon current value, for example, about 50% of Amazon’s operating income was attributed to Amazon web services. Just as of the fourth quarter in 2020, so tremendously profitable, massive business for Amazon web services. So, it appears like Jassy certainly has the chops to fill some tough shoes to fill. What do you think of this somewhat surprising, but news that was expected at some point?

Michael Kesslering: Yeah, certainly the timing may be surprising, but as you mentioned expected. 

Julian Klymochko: Yeah, it’s not always too surprising when the stocks up all-time highs, it’s always a good time.

Michael Kesslering: Yeah, no, no. I guess to our knowledge, nothing immediate on their horizon, that would warrant Bezos stepping down. But I mean, he’s viewed as somewhat of a micromanager for projects that he cares deeply about. So, the situation really is just reminiscent of when Bill Gates stepped down from Microsoft for Steve Ballmer takeover. I mean, Gates after that still had pretty heavy involvement in certain projects and strategy, but just less of the day to day. So, it kind of makes sense from Bezos standpoint. But with regards to Jassy, I mean, yeah, he was really the founder of Amazon Web Services within Amazon and the interesting aspect is that prior to that, he was basically Jeff Bezos, chief of staff for about 18 months I think it was kind of his technical assistant. A role that had been filled by a number of different founders from companies that Amazon had acquired. It never really worked out very well. But Jesse, it seems it worked out very well for him as he immediately transitioned into what would soon become over the next decade or so the largest part of Amazon’s business in terms of value creation. You know, he also has a similar style according to its insiders where he’s extremely customer centric. So, in terms of Amazon’s general strategy, I don’t think we can expect a lot of change there. You know, like AWS, just in terms of their position, I mean, you mentioned that the fact that they make up the majority of the Amazon profit, despite only being 12% of total revenue. And I mean the interesting aspect of that is, yeah, they’re the most important aspect arguably of the world’s largest company, but they also have a ton of runway within cloud computing.

I mean, they have first mover advantage and I believe they have about 45% market share followed by Microsoft and Google at substantially less, but they’re growing at a massive rate. So, to be that profitable and still growing at a massive rate with a large total addressable market is very interesting. And no doubt is why Bezos would choose him over another segment head. And one last thing just to mention, I mean for some of our hockey fans as well. I would note that he is a part owner of the upcoming expansion team, The Seattle Kraken. And so, there is a little bit of a tie in for some of our sports fans here as well. 

Julian Klymochko: Nice. Well, there you have it. Before wrapping up this file. I wanted to just have a highlight from the statement Jeff Bezos released to Amazon employees. The last part of it, it stated, quote. “Keep inventing and don’t despair when at first the idea looks crazy. Remember to wander, let curiosity be your compass, it remains day one.” Pretty Epic, and in my opinion, the greatest CEO of all time, so kudos to Bezos. He’ll be studied by business school’s management and investors for years to come. And market reaction fairly muted. Amazon was up 3.4% this week, kind of in line with the market. 



Julian Klymochko: Lastly, let’s chat about a SPAC deal, online payment company Payoneer. They announce a business combination with blank check company, this is a long one. SPACs these days typically have a pretty long name. This one as FTAC Olympus Acquisition corporation. This deal valued the FinTech startup Payoneer at $3.3 billion enterprise value. A bit of background on Payoneer. Fairly established company, founded in New York city in 2005. So about 16 years old, it provides businesses and professionals with cross border payments platform and has about 4 million customers. The business is fairly established. It is profitable as over $400 million dollars of revenue. And in terms of valuation on this deal, it’s being done at a 7.6 times multiple of this year’s revenue, a bit of different than what we’re seeing in other SPAC deals, where some of them are, you know, pre profitability or even pre revenue. So, this is more of an established business. 

As part of the going public transaction. Payoneer is going to be cashed up. They’re receiving over 250 million from this SPAC in addition to 300 million from a pipe financing that includes Wellington Management, Dragoneer Investment Group, Franklin Templeton, and Fidelity. So that pipe was well subscribed. And this deal really just showcases the appeal of the blank check structure as the preferred method of going public year to date. I think over like 80 to 90% of the IPOs have been SPAC. So, it’s really just taking over the new issuance market. And I did want to have a quote from FTAC sponsor, Betsy Cohen, which I think this is a winning deal from her. She stayed, “Payoneer is at the forefront of the rapid global shift to digital commerce across all sectors. It’s an innovative and unique high-tech, high touch platform positions. Payoneer at the epicenter of some of the most powerful and enduring trends driving global commerce today.” So, I think this is a win for Betsy Cohen. She got multiple SPAC. If you look at the last one, she did with Perella Weinberg, which in my opinion was kind of a dud, because that’s more of like a no growth business and not really what SPAC investors are looking for. But I think Payoneer provides the right combination of profitability and growth and a long runway, total addressable market and things of that nature. So yeah, it’s worthwhile paying attention to this FTAC Payoneer deal. We are long, got to disclose in The Accelerate Arbitrage Fund, been long this SPAC since at least around the IPO. And if we look at this SPAC action this week, it was pretty incredible. Not only were there just a tremendous amount of IPO’s, but a ton of business combinations to their eight SPAC business combinations announced this week for a total enterprise value, total deal value of $52.7 billion dollars. So, a pretty massive Newsweek in terms of SPACs. Wanted to highlight this transaction, because it does have some unique features. Market didn’t go bananas, but they did like it. I mean, FTAC stock was up 10% this week on the news, outperforming. Mike, what are your thoughts on this interesting Payoneer deal?

Michael Kesslering: Yeah. First, just back to your comment around her previous SPAC with Perella, taking Perella public. The irony of an investment bank using a SPAC to go public, as opposed to a traditional IPO, which obviously investment bank are involved in SPACs and it’s quite lucrative for them, but with the traditional bread butter of IPO’s for invest in banks, very ironic that they would choose this SPAC process. I feel like that’s kind of a very negative sentiment towards IPO’s, but an actual investment bank goes public vs SPAC, but back to Payoneer. I mean, interesting deal. I think you mentioned the key points on the actual deal itself. Like, I mean, the pipe financing, it has kind of a who’s, who of their traditional pipe investors. So, nothing too exciting there, and especially from, I mean, Betsy Cohen is part of the establishment within the financial services sector.

So, no surprising at all, that she would be able to get all these reputable institutions on board for the financing, but more on Betsy Cohen, because I mean, she is someone within the bank and community that perhaps is a little less known to our investors, but has had a very prolific career. Where, I mean, most recently she was the former CEO and founder of the bank Bancorp Bank. But also, was the founder of Jefferson Bank that was acquired for, I believe over $300 million dollars back in 1999. So, I mean, her roots in the banking establishment are quite strong. And then as you had mentioned, this is her fourth SPAC. So, she’s very experienced within SPACs. She was very early adopter of SPACs as a vehicle to go public. So, I mean, just her background is very interesting to follow and that’s the benefit of following the SPAC sector is many of these sponsors do have very interesting backgrounds and are quite prolific themselves. So just even reading through the following statements, you’re able to learn a little bit more about the history of some of these individuals, which is, I mean, always interesting as an investor.

Julian Klymochko: And the SPAC space, remains extremely busy. IPO’s, M&A, a ton of stuff going on. So, I encourage investors to give us a follow-on Twitter because we do produce a ton of research and content and follow every deal in the SPAC space. So, before we wrap things up today. Mike where can investors follow you on the Twitter machine.

Michael Kesslering: They can follow me @M_Kesslering.

Julian Klymochko: And my Twitter handle is @JulianKlymochko. That wraps it up for episode 114 of The Absolute Return Podcast. If you enjoyed it, definitely leave us a review. You can check out more episodes at absolutereturnpodcast.com, really excited for some upcoming guests on the podcast. Got a number of books, so that should be cool. Until next week, which you all the best in your investing and we’ll chat with you soon, cheers.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed. 


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