Be warned. We are activists. We are biased.
We do our best to find and present facts, based on extensive primary research and using public sources.
​But we will profit if these stocks decline or, when we are long, rise in value.
We do not offer advice on how anyone else should trade a stock. We present our views.


​Will the feds halt AAN’s go-private deal?
​
The Aaron’s Company looks like it’s hiding the real buyer

  • We believe regulators could slow or stop the go-private deal The Aaron’s Company (AAN) has made. Currently, the AAN share price has not factored in this regulatory risk.
  • We think IQVentures, the vehicle AAN says will pay $504 mln to AAN shareholders, may be a front for a buyer who’s afraid the deal would not otherwise pass regulatory scrutiny. IQVentures has never done a deal bigger than $10 mln, according to public sources. Government review would certainly be required for the merger of two high-interest lenders.
  • We submitted Whistleblower reports on AAN to the FTC and the CFPB. We also submitted FOIA requests to both agencies. Both agencies tend to be highly suspicious of rent-to-own and payday lending practices.
  • The other lender apparently behind the deal, CCF Holdings LLC, recently appears to have acquired several similar companies, including the chairman’s former company, TMX Finance Ltd, as well as Speedy Cash, Rapid Cash, and Avio Credit. With AAN stores, CCF would own around 3,000 locations, giving them a much larger share of a fragmented market. A combination
    could trigger anti-monopoly and predatory-lending reviews.
  • In 2020, Aaron’s paid one of the biggest FTC settlements in history over misrepresenting the price of rent-to-own payment plans. Like AAN, CCF and its new subsidiary, TMX, are no strangers to regulatory sanction.
  • At least four law firms are soliciting class-action suits, apparently because of the speed and lack of visible process around this deal.
  • Upside for insiders in the go-private deal looks to us more attractive than benefit for public shareholders. Five AAN executives or directors bought stock in Q4 2023 after discussions on the offer began but before it was disclosed to shareholders. They bought at an average price of $7.27, 39% below the offer price.
  • CCF, the possible merging firm, may have its eyes on AAN’s normally abundant cash flow and credit facilities. Could these strengths benefit AAN shareholders?
  • A special shareholder meeting will be held on September 25 to approve the merger. The DOJ rarely waits until a merger/acquisition deal has closed before filing an anti-trust lawsuit, although that was the case for Parker Hannifin’s acquisition of CLARCOR.
Picture
Aaron’s “Christmas in July” deal on a flat screen TV.

May 20, 2024

​BTMD May Make You Sick

Dangerous Side Effects, Unapproved Facilities,

Ties to a ‘Snake Oil’ Salesman, Share Dilution Coming
​

Photo presented by competitor Pro-pell as illustrating risks associated with hormone therapy.

FEATURED REPORTS

January 5, 2024
April 4, 2024

HUT

Insider Enrichment Scheme,

​and ~30% of Revenue May Be Fabricated

  • Hut 8 recently merged with U.S. Bitcoin Corp. (USBTC). We uncover that USBTC is backed by promoters with a history of legal trouble. In its short existence, USBTC appears to have defaulted on a loan and paid two government fines, one for committing securities violations.1  
  • One of USBTC’s largest shareholders is an undisclosed related party.
  • Our diligence highlights USBTC’s core asset, purchased from bankrupt Compute North, has historically failed to provide energy and high-speed internet--unquestionably the two most important inputs for mining Bitcoin. Compute North’s bankruptcy docket showed that no one else wanted the assets, aside from one bankrupt entity, which bid up the price of USBTC.
  • One person highly familiar with USBTC told us, “without the merger, [USBTC] would have done a structured bankruptcy.” Why then did HUT pay $745 mln to acquire this company and its planned payments? Even worse, we estimate a value for USBTC that’s as much as 70% less. Typically, such egregious over-payments occur only when management is being enriched.
  • Ultimately, we strongly believe that shareholders are likely to feel the pain of being on the wrong side of an over-levered pump-and-dump, only to be left holding the most inefficient Bitcoin miner, which is unprofitable even at a Bitcoin price of over $60,000.

AXTI

AXTI may be on the brink of collapse

Picture
  • AXT Inc (AXTI), a manufacturer of geranium, gallium arsenide, and indium phosphide (key ingredients for LED and semiconductor chips) saw a 140% increase in share price in February, following management’s enthusiasm about AI opportunities.
  • AXTI is listed in the U.S., but its business operations are almost all conducted through a subsidiary in China. AXTI wants to list that subsidiary in Shanghai to capture new financing. But the listing prospectus attracted unexpected scrutiny and unveiled a plethora of undisclosed issues in China. Our research has found those issues are only the tip of the iceberg.
  • The listing vehicle raised $49 mln from private investors at a sky-high valuation in 2020. AXTI expected to capture much more investment at the time of the IPO. But it has been 18 months since the last IPO update, and U.S. investors haven’t been told that the IPO has apparently been blocked by Chinese regulators.
  • In March 2023, Chinese press reports said: AXTI’s subsidiary, Tongmei, saw its “IPO blocked: The U.S. semiconductor ‘shell company’ was split off for [a local] listing, related-party transaction prices were unfair, and the authenticity of company performance was questionable.”
  • We have uncovered a deluge of reasons why Chinese regulators potentially blocked this IPO, including falsifying data, tax evasion, improper storage of hazardous chemicals, suspicious related-party transactions, IP litigation, and defaulting on wages to employees.
  • Sales have collapsed by over 50%, and there is no reason to believe that AXTI can revert to its formerly reported margins and sales numbers, despite the claims that they make about AI demand.
*Please see then full report for important footnotes
November 27, 2023

MVST

Still a China Hustle​​

  • On November 22, MVST’s chairman posted videos on his LinkedIn account showing significant activity in the Huzhou factory. We sent people to the plant to verify and found that the company does, in fact, have many employees, but, based on our research, nowhere near the 2,500 the chairman claimed. We are re-issuing this report to fairly and correctly address the company’s recent public statements.
  • We think the majority of MVST’s sales may be fake. MVST’s Chinese customers account for 57% of revenue in 2023, but the China factory is quiet and we believe produces little. MVST China has disappeared from Chinese procurement lists, and local competitors say the company is not making discernible sales. We are skeptical of the revenue shown in local financial statements.​​
  • We suspect MVST knew a DOE $200 mln grant for a U.S. factory addition had been rescinded but failed to inform investors until the information hit Reuters months later, and MVST had no choice but to disclose.
  • We question the company’s reported backlog, currently $678.7 mln. Backlog growth is much higher than revenue growth. There was a $189 mln jump in Q2 2023, but the only visible addition came from a December agreement with REE Automotive -whose entire revenue is less than $1 mln. Regardless, based on the company’s track record, this could end up being a backlog of future losses.
  • MVST is a Chinese EV battery business that has failed. MVST, whose operations were almost all in China before the merger with Tuscan Holdings, nearly went bankrupt in 2019 but was saved by the SPAC. Tuscan had been seeking cannabis targets but settled on batteries.
January 24, 2023

ISPR

Insider Enrichment Scheme,
​and ~30% of Revenue May Be Fabricated

Management hiding stock
ownership through undisclosed related party,
​
​a stock-promoter cabal, and a host of left-for-dead assets

  • We believe that ISPR exists to enrich insiders via undisclosed related parties.
  • ISPR appears to line its chairman’s pockets by overpaying the Shenzhen factory he owns. While ISPR loses money per vape, the Shenzhen company earns net profit of 11%, resulting in millions to ISPR’s chairman. While competitors sport 70% gross margins, ISPR lags, at 16%.
  • Original Chinese documents suggest to us that a big chunk of supply is fabricated. While the sole, related-party supplier grew sales at just 12%, ISPR reports they’ve bought 41% more. The majority of ISPR’s COGS goes unpaid. It’s typical of a China hustle to show growth through big contracts with related parties that don’t get paid.
  • Over 30% of sales are made by an undisclosed related-party - and we think a lot of those sales could be fake.
  • The co-CEO, a cannabis entrepreneur, has been accused of extortion and violations of drug law. A whistleblower at Michael Wang’s former company raised concerns about a “genetic consulting” payment. Wang wrote back “Just make sure no one knows about this.” 
  • Money is tight. Cash and equivalents of $25.7 mln could last less than one year, and the company needs several million for capex. ISPR tells shareholders it needs new factories to improve margins. But those factories appear to be just pass-throughs for the chairman’s Shenzhen factory.
  • ISPR was brought public by Tiger Securities and other brokerages for small Chinese companies. Tiger’s top 14 losers saw a 38.7%
    drawdown within three months of IPO.
  • A recent big movement in the stock, from $7.93 to $16.30, was unjustified by any announcement, coverage
    upgrade, or fundamental change and makes us question whether there is price manipulation behind the curtain.
June 27, 2023

LI

Behind the Latest Lithium

​Promote​

  • American Lithium (NASDAQ: AMLI, TSXV: LI) appears to have siphoned >$100 mln to parties we think are related, most of which appear undisclosed.
  • Our review of official documents indicates that AMLI paid several million to companies controlled by the founder’s daughter, an optician.
  • AMLI bought assets from notorious promoter Jason Christopher Shull, who was later blocked by Canadian regulators from transacting in several listed companies.
  • Using official documents, we reveal many significant payments to controversial figures such as Talal Yassin, Edward Reisner, and Anders Nerell. All three have been implicated in promoting penny stocks embroiled in controversy, including in cannabis and mineral exploration.
  • AMLI is spinning out a uranium asset in Peru that we think will never be mined. Experts believe extracting the uranium, which is mixed with lithium, is very difficult to do safely, nor has this type of deposit ever been mined at scale.​
  • Regulators have not granted a mining permit to the Macusani asset, which is plagued by environmental problems and protests by the local community. We question whether the spinoff is to distance AMLI from social and environmental fallout.
  • AMLI has paid large sums to marketing companies like Native Ads and Promethean Marketing that contract with penny-stock executives to pump their companies’ shares. Promethean’s owner was charged by the SEC in a “long-running fraudulent scheme." Native Ads uses sites it discreetly owns to promote the share prices of small cap stocks and was involved in promoting accused fraud Standard Lithium.
  • Don’t be fooled twice: the company founders have a long history of promoting stocks that surged in price then crashed: the ones we tracked dropped by an average of 87%.
  • AMLI has just acquired 9.9% of Surge Battery Metals (NILI CA), which looks like another related party. Surge is a hugely loss-making company with significant board overlap.
  • In November 2022, the Ontario Securities regulator ordered that company CFO Philip Gibbs be prohibited for one year from acting as a director of any reporting issuer because he had “misled investors.” Gibbs remains company CFO.
  • The type of lithium deposit in AMLI’s marquee project, TLC, is laced through clay and has never been commercially exploited.​
October 7, 2021

FFIE

Move Over, Lordstown:
at Faraday, EV Stands for "Embezzlement Vehicle"

We don't think Faraday Future (FFIE), an EV SPAC, will ever sell a car. So far, it's nothing but a bucket to collect money from U.S. investors and pour it into the black hole of debt created by its founder, China's best-known securities fraudster, Jia Yueting.

Jia is the Chinese equivalent of Elizabeth Holmes. But just as she might be able to raise money if she fled to China, so Jia has moved to the United States, where there's a new pool of gullible investors.
Picture
​Cartoon by Johannes Leak
Disclaimer
The reports and other commentary displayed are for information purposes only and should not be relied upon as investment advice. The information provided is not a complete analysis of every material fact regarding any country, region, or market. Because market and economic conditions are subject to change, comments, opinions and analyses are rendered as of the date of this posting and may change without notice. 

Opinions are intended to provide insight on macroeconomic issues and commentary is not intended as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy.

Investments involve risk. The value of investments can go down as well as up, and investors may not get back the full amount invested. The information contained in these reports has not been reviewed in the light of your personal financial circumstances. Reliance upon the information is at your sole discretion.
© 2024 J Capital Research USA LLC. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J Capital. Use of this publication by authorized users is subject to the J Capital Authorized User Content Agreement available here.