Blue Orca Accuses Li-Cycle Of Shady Accounting Practice

What’s New In Activism – Olympus Glad For Activist Board Member

Yasuo Takeuchi, the CEO of Japanese optics products maker Olympus Corp (TYO:7733), said the involvement of ValueAct Capital was positive for the company and had led to strong share price performance.

ValueAct invested in the company in May 2018 and since then the stock is up 132%, compared with Nikkei 225’s gain of around 20%. With ValueAct partner Robert Hale in the boardroom, Olympus was able to make bold moves like selling assets and focusing on medical devices.

Q4 2021 hedge fund letters, conferences and more

"We have committed that we will become a leading global med-tech company; that requires a lot of change, eventually the change in culture and any types of diversified opinions and viewpoints are very much welcome," Takeuchi said in an interview with Bloomberg. "I'm very glad that I have Robert Hale as a board member."

Olympus is now considering a spinoff of the scientific solutions business, which could free up to $5 billion in cash for acquisitions. Takeuchi said he is looking "into inorganic growth opportunities."

The activist disclosed a stake in May 2018 and in January 2019 it gained a seat on the board for Hale. At the time, Takeuchi said there was some concern about having a shareholder representative on the board, but noted it was "an effective measure to include an investor perspective."

ValueAct joining the board of Olympus was a rare victory for an activist in Japan. Since then, activists have become increasingly successful in joining Japanese company boards via settlements and proxy fights.

To arrange an online demo of Insightia's Activism module, send us an email.

Activism chart of the week

So far this year (as of March 25, 2022), globally, 314 companies have been publicly subjected to activist demands. That is compared to 290 in the same period last year.

Source: Insightia |Activism

What's New In Proxy Voting - SEC denies JPMorgan Chase

Voting chart of the week

In the 12 months to June 30, 2021, North American investors supported global shareholder proposals on environmental and social issues 46.2% of the time on average. European investors supported these proposals 66.9% of the time.

Source: Insightia |Voting

What’s New In Activist Shorts - Blue Orca v Li-Cycle

Blue Orca Capital accused Toronto-based battery recycler Li-Cycle Holdings Corp (NYSE:LICY) of engaging in shady accounting to inflate its revenues and predicted the company would implode due to governance issues and lack of capital.

The short seller published a March 24 short report calling Li-Cycle "a fatal combination of SPAC trash, stock promotion, awful corporate governance, faulty accounting, and a broken business model which is not economically viable."

Blue Orca raised several red flags with respect to Li-Cycle and the people running it to argue that the company would likely turn to be "another trash SPAC to fall into ignominy and failure."

The report alleged that Li-Cycle was using an "Enron-like mark-to-model accounting gimmick" to significantly boost its revenues and that the business was burning cash at a rate that will likely force it to raise at least $1 billion in the near term to stay afloat. Blue Orca also accused the company of hiding negative gross margins through "nebulous" reporting.

The short seller also said Li-Cycle’s chairman was a "serial penny stock promoter" recently sanctioned by Canadian regulators and that the company spent $0.5 million on goods and services provided by related parties, including a leather goods maker owned by the CEO's family.

To arrange an online demo of Insightia's Shorts module, send us an email.

Shorts chart of the week

So far this year (as of March 25, 2022), five European companies have been publicly subjected to an activist short campaign. That is up from one in the same period last year.

Source: Insightia | Shorts

Quote Of The Week

This week's quote comes from Bruce David Klein on Beyond The Boardroom when asked about the more interesting things in Carl Icahn's house.

“In his office, he has some quirky items. One that seems to be getting a lot of Twitter reaction is his notebook which on the cover says ‘People I want to punch in the face.” – Bruce David Klein

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