And we're back. Welcome everybody to a special edition of the Weekend Rip. You might notice that we look a little different. It's also white shirt day here at Weekend Rip. Yeah, we all planned this out. We're matching. But no, we're here in New York City because we were here for the StockTwits awards show on Wednesday, which went off without a hitch. And that means we get to have our wonderful guest here today. Don't adjust your TV. There is actually three of us right now.
Yes, that's correct. We've got Edwin Dorsey, author of The Bear Cave, joining us this week.
We're going to be diving into that real fast. But first, quick recap of the markets. We had the Q's up on the week 3.38%. SPY was up 2.79%. Bitcoin to no one's surprise up again 3.35%. And the VIX just absolutely plummeted. Everything I can, folks, to take down Bitcoin but I cannot get it back. He can't do it, he's trying so hard. The VIX is almost going to be back in the teens. It's unbelievable. And you know I've got a quick—oh, the S&P apparently hit a nine-session run straight in the green which is the best rally that it's had since 2004 in terms of consecutive green days. So that's fun if you're short, if you're in The Bear Cave—that is, not assuming that you're short the market. But I predict, I just want to make a quick prediction here that we are in the midst of a COVID 2.0 style rally back toward all-time highs. It'll be a little slow, but probably a lot quicker than everybody thinks because there is so much bad data that we're all going to be waiting for. But I think it's going to take so much time for it to work through the system that by the time everybody knows about it, we'll be back at all-time highs and it won't matter anymore because everybody will just be able to say, 'Well, we all knew that bad data was there and it's already priced in.' So, that's kind of what I'm thinking is going to happen. But I could also be dead wrong. So, how do you feel about that, Edwin?
Uh, you know, I'm not really a macro guy. I am hyper-focused on just stock-specific stuff, you know, VIX indexes, like very much outside my wheelhouse.
Okay. Well, that's a good place to start. It also does feel very COVID-coded right now in a horrible way where I don't know if you guys have been seeing just all the headlines like you have six weeks before stores are empty and you're like okay you better go get your kids those dolls. That feels a lot like COVID in the sense that bad data comes out—like we just had GDP numbers, the first GDP numbers came out negative, recording the first contraction in US growth for three years, and that's before the tariff started. And the market doesn't care. And that feels a lot like COVID where it was just bad data would start coming out and it just did not matter.
Anyway, Edwin, why don't you tell everybody in case they don't know who you are, what your whole thing is.
Yeah, absolutely. Thanks, guys, for having me. I'm Edwin Dorsey, author of The Bear Cave newsletter, a Substack newsletter broadly focused on exposing corporate misconduct. There's kind of two components to my newsletter. There's a free tier where I'll summarize the week's news, summarize activist short reports, highlight suspicious executive resignations, and link to some interesting tweets. And then there's kind of a paid tier where twice a month I'll publish on one to ten billion dollar public companies that I feel are misleading investors, harming customers, on the wrong end of disruption. It's broadly a publication that a lot of people in the short seller world read to keep up with news and generate ideas.
How long you been doing it?
About five years. So, I started it my senior year of college and it just became my full-time job and, you know, it's kind of taken off.
And how does one get into this line of work?
Well, so it's funny. We were talking a little bit before the show started and I hope it's okay to say you were telling me that you kind of want to move to New Orleans.
Maybe. Yeah, I'm thinking about it.
And one of the things you liked about New Orleans was that there's not a lot of big corporations there. So, you know, where does this kind of like anti-big corporation sentiment...
Yeah. Why do you hate corporations so much? What did corporations ever do to you?
I don't hate all corporations. Big business is important in the world and there's a lot that are important. New Orleans is also happy and upbeat, which I think matches my vibe.
I'm curious how you got into, you know, got really drilled into finding, you know, what these bad actors are doing and all that.
Absolutely. So, I've been passionate about stocks from a really young age, like second grade, all about the stock market. Now, my freshman year of college by coincidence, I got introduced to two of the big short sellers in the world. One is Marc Cohodes, who used to run a big short fund and now he's more independent and exposing fraud. And my second really early mentor was Jim Kurthers, who ran a billion-dollar short fund called Sofos. I interned for them on and off all four years of college. So that's how I got to learn to do really deep research, got to work with people in the short world and activist short world. So that was kind of a big—I joke if my two early mentors were in private equity, maybe I would have drifted there. If they were in micro caps, I might have been drifting there. I also got to intern in the SEC enforcement division when I was in college. So I got to see the other side of the games companies play. So having early mentors in the short world, doing a little of activism as a college student, going after companies, interning at the SEC, the combination of those experiences made me uniquely positioned to be decent at this type of work.
What years was the SEC? Was it Gary Gensler's?
Yeah, it was under Gary Gensler. It was under Jay Clayton. I'm sorry.
I'm sorry, how do you say his last name?
Oh, this whole time I've been reading it as Cahodes.
That guy. So, for those of you who don't know, this guy's a bit of a maniac. I like him. I've talked to him on the phone and he's got his like baseball bats that he'll post a photo of with like the names of the companies and the CEO. And he made me a lot of money. He—I think it was Silicon Valley Bank. I mean, a lot of people were starting to talk about it, but he did. And I was like, you know what, screw it. He's been right about a bunch of stuff. And I loaded up some puts and then, you know, it got halted and then opened down and I was like, am I ever going to... It took a while for the Options Clearing Corporation to—like I was worried that I wasn't going to get the money, but they ended up doing it. And yeah, during—it was interesting watching him talking about GameStop and AMC and stuff. And he's always—there's one guy that he's always talking about, some medical... Parker Petite?
What the hell did that guy do to get on this guy's bad side?
You don't want to be on Mark's bad side, that's for sure. And he has a phenomenal track record. He's probably one of the people I talk to a lot in terms of bouncing ideas off of. The Bear Cave also wrote about Silvergate and Signature Bank and that was one of his many great calls. So MiMedx—they're kind of like a weird medical device company. They make tissues out of placentas that can be used as skin grafts. And Mark thought it was a big fraud and they were doing a lot of games with the VA recognizing revenue early and Mark was right and the CEO also ultimately went to prison. But there's this legendary clip of Mark at a JP Morgan health conference where he goes and, you know, the CEO is presenting to a hundred people and Mark just raises his hand and starts saying, 'Are you a fraud? Tell me about this, tell me about this.' And they try to kick him out of this event. And I think because the CEO started fighting back against Mark—the CEO had a bunch of blog posts criticizing him—and when you engage and start attacking back, I think that's when you get the full Cohodes. And he is unique in that not only is he really smart, he can be his own catalyst, going to the media and regulators, and if he's right, getting them involved and exposing things. So he's very good at being his own catalyst and driving change.
Why don't you and guys like that try to—I mean you did work at the SEC but why not stay there and effect change through that route?
So, I mean, I often, you know, forward my stuff to the SEC. So, you can either—the SEC has a public tips, complaints...
Does the SEC even exist anymore or is that a real...
I think it's changing under the Trump administration. Now, people don't realize this. The SEC is largely comprised of lawyers. And the SEC, I kind of view it as they're like a disclosure-focused agency. So, they're not like going to go in and say you're a fraud necessarily. They're good at saying what went wrong. Like they're like financial archaeologists. Jim Chanos says they're good at saying what went wrong after the fact and they're good at pushing for more accurate disclosures, but they're not really doing necessarily the type of work that I would do or maybe like an activist short does, but it kind of goes hand in hand.
Yeah. So, you can maybe refer something to them and then they could push for additional disclosures from a company, but the SEC is very much lawyer-focused and trying to get companies for more full and complete disclosures rather than maybe shutting them down.
Folks, you should subscribe to his newsletter because it's great. It's just interesting because you chronicle—I don't know how you do it, I'm sure you've got easy tools or whatever—but all the various C-suite executives who are retiring or quitting or getting ousted for whatever reason. And it's always interesting if it's like a stock that I'm long, I'm like oh what's going on with this one. And then you've got the SEC comments part where they're asking all these various... I did not realize how often it happens where they're asking like, 'Hey, you put this in your 8K, but we need clarification on that.' And what's alarming to me is that that kind of information isn't necessarily readily...
Yeah. The companies aren't—and they're probably not as obligated to be as forthcoming about that. You kind of have to do your own due diligence as an investor to seek that stuff out.
Which makes me feel kind of stupid because I'm not doing that.
No. Most people don't. Even professional investors don't know what comment letters are and correspondences.
Oh, yeah. Yeah. So, speaking of Mark, yeah. Have you ever found yourself in Twitter beefs?
Uh, you know, a little bit, but I think overall I would say he's definitely been a positive influence in my life and someone I admire. You know, everybody has small dramas here and there, but I try to stay focused on keeping it professional, looking into new companies. I spend a lot of time tracking executive resignations and trying to make my newsletter useful. So, that's my main focus.
Have you ever been threatened by people out there who are like super long a stock that you then put out a report on? And because you can legitimately move markets, I've seen it. And have you ever had anybody be like, 'Oh, fuck'—because I know Mark gets threats all the time. Like, have you ever had anything like that?
You know, on a small scale. So I've never been sued. I really try to be understated in the newsletter. So, I usually don't say fraud or scam or price target zero. It's just like lay out the evidence and let the evidence speak for itself. I've got a cease and desist or two before. The craziest thing is when I was in college, I was railing against a publicly traded babysitting platform called Care.com and they sent like a legal letter to my parents' house. They sent a private investigator and they called my college to try to get me in trouble. So that was the weirdest experience, but sometimes you get like an email from an odd person, but I wouldn't say anything huge.
Yeah. Okay, that's good. Fingers crossed.
Yeah, you just got to—that makes sense if you keep it objective versus other guys like Citron going out there and just being like this is a full-on fraud and they're a house of cards and stuff.
That's partly because my model is really different, right? So I'm not day trading around my reports like a lot of activist short selling. It's around trying to create intraday stock moves and that's not my model. My model is trying to get reader credibility and being right over a long time. So I think it helps to be understated and just lay out the facts.
How did you grow your audience like this? Did you have one big call or was it just slow over time building and building?
Yeah, so that's a great question. So the big call that I think put me on the map a little was Care.com. I was really early in highlighting safety issues at this babysitting platform and that's what kind of got me credibility. And then in terms of growing the audience, I was really lucky in that I started The Bear Cave in February 2020, my senior year of college, right before the pandemic hit. And I really started it because I wanted to get a job. I thought if I put smart things online, people will reach out to me and want to hire me. And that was kind of the right line of thinking. However, in the pandemic, the newsletter grew like crazy. It was the best time ever because people were online, people were bored, people were looking for stuff to read, people that had extra income, and the stock market was going crazy with a lot of retail trading. So, I got really really lucky with the timing. And yeah, you kind of grow a Twitter audience, convert that to free newsletter people, convert that to paid newsletter people. And now, I think the two avenues of growth is trying to go on podcasts and just having good information. Now that it's big enough, it'll grow through word of mouth by putting out good information.
So, how did you—like using Care.com as an example, how did you see these safety issues that no one else was seeing? What came across your...
Yeah. So, the way I heard about Care.com is—and they're no longer publicly traded.
I don't even know if I've ever heard of this.
They were publicly traded. Roughly a billion-dollar market cap, a platform for parents to find babysitters and babysitters to advertise their services to parents.
Is it like Yelp for babysitters?
Kind of. Yeah, kind of. More involved—for babysitters. And I had a friend who was a babysitter on there who's like, 'You should check them out. They're kind of sketchy.' So I see some local news reporting about safety issues. I saw a lawsuit or two. They claim to be running background checks. So I'm like, 'Let me test the process out myself by signing up as Harvey Weinstein.' So I used a photo of Harvey Weinstein. I used the email
[email protected]. I impersonated Harvey Weinstein. I made up a social security number and I consent to their background check and I'm documenting this all. And they say, 'We'll get back to you in 48 hours on whether or not you're approved.' And I'm like, 'There's no way they approved me. This is obviously a fake account.' And 48 hours later, I passed their background check. Hello, Harvey. I was verified, CPR certified, and I started applying to babysitting jobs as Harvey Weinstein. Then I'm like, 'Okay, something is wrong, right? It's clear.' And then I'm reading all the lawsuits locally and they're charging parents for these background checks that don't work. And they're clearly—like if I can lie, a sex offender can. Someone can. And you start seeing all these incidents. So I write a little article, tweet it out, stock falls a little, a board member resigned the next day, which maybe was related. And I thought that was the end of it.
And then I get called into the Dean of Students office at Stanford and they're like, 'We got a phone call about you violating company service on like using Stanford Wi-Fi.' And they're like, 'Do you want to take your article down?' I'm like, 'No, this is corruption. What?' And so I decide to dig in more using Stanford Wi-Fi. I go to every state attorney general and I use FOIA, which is a big thing I'm good at, to get consumer complaints from every state. And then I got parents writing letters, I went to the New York City police department and I FOIA'd every single 911 phone call that used Care.com in the transcript. So I became obsessed in college with this company and I'm sending letters to all the people that had ever called 911 about Care.com just to learn everything.
And I wrote another article and then long story short, I forwarded this to like a hundred journalists. Only two replied, one of whom was Gregory Zuckerman at the Wall Street Journal. Then he did a year-long investigation that resulted in a front page story where Care.com babysitters with criminal histories were approved to babysit kids on the site and oftentimes the kids died in their care. So, somebody banned from running a babysitting service or daycare is running it on Care.com. Somebody who's told she can't run an unlicensed daycare runs it and then kids drown in a swimming pool. Like a lot of these types of cases, people with DUIs and stuff approved—clean background checks through Care.com. Parents trust them and the kids get hurt. Now, so then the CEO, CFO, general counsel resigned. It was taken private by IAC and they kind of fixed the issues. So this is where I can make a real difference—it's not just impacting the stock but you can maybe change society for the better through journalism and giving it to bigger journalists.
I don't know why would you—I would think that the brand would be so tarnished. Why would a company like IAC even bother swooping that up? The IP has got to be just so toxic at that point.
Well, I think they view it as something they could fix. So, you know, there is a demand for babysitters. This is a big problem a lot of people have and maybe it's fixable for them. So you just put in better safety procedures and people will use it.
Wow. Okay. So, that one was a bit unique in someone kind of gave you a tip. So, were there—how do you kind of approach...
That is beautiful though.
I'm in awe of the credibility. So like, and you can find it—but that's what gave me credibility, why people kind of said, 'Oh, Edwin Dorsey the college student, like I care a little bit about what he says.' So that is why I think I was able to start the newsletter.
I'm picturing the husband and his wife's nagging him like, 'Did you get the babysitter?' And he's rushing and he's like, 'Harvey, this guy looks good. He's an older man. He looks fine. Harvey the babysitter. Cool.' His wife's like, 'Show me.' And it's just Harvey Weinstein from jail. Yeah. Okay.
So that was your first one. You got to follow up with a hit after that. What was your very next one? Because you got to keep that credibility train going.
So, I mean, I've written on I think like 90 or so companies in The Bear Cave and some have been great, some have been terrible. Like, there's a lot of small ones that maybe went bankrupt. In terms of two that are similar to Care.com in which I think they can have a big impact, I've written a lot about Roblox over similar child safety issues. KinderCare, which is a daycare company, I think has a lot of similar child safety issues.
Are you the guy who did the whole pedophile problem? The Roblox has a pedophile problem?
Well, so I've written about it a lot. I think Hindenburg later wrote on it as well and then the Wall Street Journal wrote about the Hindenburg stuff. But, you know, I've been writing about that for a long time. I think the Roblox thing is getting swept under the rug. It'll kind of break in the Wall Street Journal and then parents are like, I don't care, it keeps the kids quiet. Well, I think there's a view that look, kids aren't safe online. If you have tens of millions of kids online, somebody's going to do something bad. Parents should educate their kids to not talk to strangers. Playing with Harvey the Roblox player. Yeah. But there's some things that make Roblox unique because it's such a young user base. They don't require a phone number or email address at signup because a lot of the kids don't have that. So, you can just make a username and password. And why that's risky is it makes it easy for like a bad person who's like 40 to have three different accounts and manipulate a kid more easily if you have three or one. And then it makes it tougher to ban bad actors from the platform because you can ban them, but they just make a new username and password. If you don't require a phone number, it gets tough to permanently ban someone. So there's a lot of issues that are unique to Roblox that I think make it at least a less safe place online. Whether or not that'll impact the stock, that's going to be a little tougher to say.
Wait, so but they're more of a—you're not finding—they're more of a company with different daycares all over the place?
Yeah. They have like hundreds of daycares across the United States and they've been kind of a roll-up through private equity. But, you know, the kind of view I have of private equity both in healthcare and like early childhood education, daycare—it's all about cutting cost. There's only so much you can charge and often you get subsidies from the government for each person you enroll. So, it's just about cutting costs. It's reducing the number of staff and paying them less and that's going to lead to worse patient outcomes in healthcare and lower outcomes for children in childcare.
Yeah. I mean that's the story as private equity just buys up everything and it just gets shittier for all of us.
Yeah. But I think maybe for like an industrial company you could hope they instill good governance, they instill best practices and maybe laying off people there is actually good because you have too many people. But with like healthcare and childcare it's like those are explicitly—we don't want that.
So, were you looking into KinderCare because of the private equity angle or because just piggybacking off of the Care.com thing? Like, what was the thing that made you perk your ears up for something like that?
You know, I love that question because it's actually somewhat new. I love using ChatGPT. I'm obsessed. I'm a Pro tier member. I use deep research all the time. And in the case of KinderCare, I literally asked ChatGPT, go through every IPO in the last year and highlight ones for me that have high levels of consumer complaints. So, it did that for me and then it gave me a list of 10 and I looked through them all and I found two that I think would be relevant. So, KinderCare, that's how I heard of them.
Uh, Ibata, which I've also written about. They're like a couponing company. You download an app and you can get discounts on goods. It's very gimmicky. I think they're bad.
I think I have a friend who works there. Are they public?
They're public. Yeah, they're recently public. Yeah. Very odd. Very odd culture. Very odd CEO.
You've written about Groupon before, too.
No, I well—I recently published a list of like a hundred kind of value traps. GroupOn was on that list. I haven't done a dedicated article about Groupon. However, I think in general couponing companies are great shorts just in general because it's tough to make money off a demographic that doesn't want to spend money, you know?
No kidding. It's like how are you going to make a lot of money with coupons? I think of like GoodRx. Like how the hell does that company make money? It's just they pass out coupons that like, hey, you want 99% off of your meds. Like, okay, where's the catch? What is the catch here?
Yeah, I'm less familiar with that and healthcare is so complicated. Who knows?
But it's like I bought it. It's just, you know, like it's so silly. It's like you go to a grocery store, they tell you, hey, these 10 items, you can get 50 cents off if you scan your receipt. And I don't know, it's very gimmicky. It's not a fun user experience.
On Glassdoor. You know, one of the basic things I do is I always read every Glassdoor review for these companies I look at and like terrible reviews. It's like every other engineer is like we're collapsing. We're lying to our clients. It's terrible culture. The CEO is weird. It's very, very negative.
I never thought of the Glassdoor. Are you like a pro subscriber on Glassdoor? I don't know if they have pro tiers or anything.
But I do it a ton. So in terms of like another way I've generated ideas a little is I ask ChatGPT, go through the Russell 2000, go through the S&P 1500 and find me the companies with the lowest ratings on Glassdoor. And now you're going to get some stuff that you'd expect and not all of them are going to be good shorts but you do that as an early stage, you look through a hundred, then three might stand out as hey something seems really odd here. And it's not as simple as like look at the ratings. It's like I look for specific things that people say. So if somebody is referencing playing games at quarter end, like management is always forcing us to try to hit the sales target by the quarter, then something might be wrong internally. You look for saying things where the leadership is acting unethically. You look for things where people are saying oh we're lying to our clients or our tech stack isn't where it claims to be. If you see that type of stuff then to me it's like okay I really want to dig into that.
What did you make of the Super Micro stuff when that all came out? You know, that reminds me of the juicing numbers and stuff.
