It is our belief that Capitec management have continued to mislead investors since our previous correspondence with the company.
End-of-financial-year announcements in 2018 are reflective deteriorating business conditions and corroborate the continuity of several intentionally misleading accounting practices we have reported in the past.
We have again entertained Capitec’s invitation to field questions regarding its business.
An open letter to Capitec’s Audit Committee can be downloaded below:
Viceroy Letter to Audit Committee – PDF Download
In this instance, we are addressing the audit committee with our concerns, as they relate to broader financial reporting transparency and flawed management analysis, corroborating our previous analysis of unsustainable business practices.
Our continued review of Capitec’s practices and financial results leads us to believe management’s delivery of analysis to stakeholders is extremely misleading, and not at all reflective of declining business fundamentals.
This report will follow issues we have raised in previous reports and correspondence with management. You can find all of these reports on our website:
Over the past eight months, Viceroy have conducted an investigation into MiMedx Group, Inc (NASDAQ:MDXG). We have presented our research over the course of 20+ reports which can be on our website.
In the interest of those who have only recently begun following the story, Viceroy have decided to consolidate the major aspects of all 20+ reports into one document, organized by topic.
PDF Download Link – Greatest Hits MDXG
This is still a lengthy document however readers should be conscious that it is a combination of over 20 separate reports, which collectively is still small sample of the hoard of data Viceroy have provided to regulators.
When we began our investigation into MiMedx, we were shocked by the sheer volume, brazenness, extent and historic precedence of the fraud being perpetrated by the company. MiMedx management has yet to acknowledge any wrongdoing, remaining unrepentant despite the existence of several federal investigations into the company.
We reiterate our opinion that due to the overwhelming nature and amount of evidence against the company we believe MiMedx is a robust fraud, entirely uninvestable, and worth $0.00.
We encourage any persons with further evidence of fraud within MiMedx’s operations to lodge an anonymous report with regulators through the following channel.
Alternatively, Viceroy are happy to take the heat on publishing more evidence of malpractice at MiMedx, which we will treat with the utmost level of confidentiality. You can reach us at email@example.com.
Further reading on MiMedx’s criminal activity can also be found on:
Discoveries by CTS Labs’ research into AMD flaws eliminate AMD’s competitive advantage in enterprise server segments and the company’s price competitiveness in retail aspects can no longer be justified.
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The company’s rhetoric is that this is a non-issue hinges on the non-argument that administrator access must be established in order to exploit the vulnerabilities identified by CTS. This is short-sighted as the surrounding statement that most hackers will not have the know-how to exploit these vulnerabilities.
CTS have recently released a video showing the exploitation of AMD’s vulnerabilities to completely circumvent Windows Credential Guard and obtain decrypted passwords. AMD management specifically highlighted Windows Credential Guard as a key obstacle to the execution of CTS Labs’ identified exploits.
The video can be viewed in full here: https://www.youtube.com/watch?v=8YQaWIWbzhI&feature=youtu.be
Viceroy believes the practice of giving AMD discretion as to when, if and how it reports its own vulnerabilities facilitates poor corporate disclosure and keeps stakeholders in the dark. This is not how free financial markets operate for a reason and is validated by the SEC’s most recent statement2 relating to cybersecurity flaws: we would similarly not give fraudulent companies the discretion as to if and when they inform their investors they are a fraud.
- Ryzen and Epyc processors facilitate tremendous freedom of access to customer’s data –The identified vulnerabilities in AMD’s EPYC and Ryzen processors give hackers the ability to entrench malware at the hardware level, making them virtually undetectable and untouchable by security products. By abusing these vulnerabilities at the Secure Processor level, malware characteristics can give hackers unlimited control over entire networks. None of the vulnerabilities identified by CTS, both firmware and hardware, require physical access to computers to be exploited. The continued sale of these processors puts customers at significant risk.
- The security protocols that AMD have been promoting put customers at unacceptable risk to vulnerabilities identified by CTS – We expect AMD cloud customers including Microsoft Azure, Baidu, DellEMC and TenCent will flee in the short term given the serious nature of chip flaws. AMD is unlikely to be trusted in this space again.
- One Ryzen chip could endanger an entire enterprise network – Vulnerabilities identified in the Ryzen chip allow hackers to perform credential dumps on infected Ryzen workstations even if the latest security mitigations are employed. Malware can quickly spread to other workstations throughout enterprise networks, regardless of whether they use a Ryzen chip or Intel. No prudent CISO or CTO will risk their network or their security by buying a Ryzen chip over more secure competitors.
This report expands on the financial impact of the CTS Labs vulnerabilities, specifically the impact of future earnings and possible legal liabilities that Viceroy believes will arise against the company. Viceroy have appointed lawyers to assess the reliability of the security claims made by AMD considering the basic level flaws that have been identified.
Viceroy analyze CTS Labs’ report exposing fatal security vulnerabilities across AMD products
PDF Download Link
CTS Labs, a cyber-security research firm, released its findings on http://www.amdflaws.com. These findings demonstrate that AMD’s key products, and it basis for profitability and growth, the EPYC and Ryzen processors, contain severe and pervasive security flaws that put users and organizations at an unacceptable and damaging risk. We understand that these flaws are difficult, some practically impossible, to patch.
We believe that AMD was compelled to release products as quickly and cheaply as possible as it was falling behind its competitors. This has led to what appears to be complete oversight or negligence of security fundamentals of AMD’s products, which promote an evidently misguided competitive advantage – particularly with its Secure Processor (a.k.a. Platform Security Processor or PSP) – of providing “the greatest peace of mind on every AMD product.”. Nothing could be further from the truth.
Viceroy, in consultation with experts, have evaluated CTS’s report. We believe the issues identified by CTS are fatal to AMD on a commercial level, and outright dangerous at an international level.
In light of CTS’s discoveries, the meteoric rise of AMD’s stock price now appears to be totally unjustified and entirely unsustainable. We believe AMD is worth $0.00 and will have no choice but to file for Chapter 11 (Bankruptcy) in order to effectively deal with the repercussions of recent discoveries.
Date: 13 Mar 2018
ProSieben’s (ETR:PSM) growth story is a lie: earnings manipulation, huge put liabilities – Published March 6, 2018
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ProSiebensat.1 Media SE (ProSieben) is a European media company focused in the German-speaking TV and digital market. The company’s core business is advertising-financed free TV, supplemented by digital segments built by a diversification campaign over the last half-decade.
Diversification has proven a costly and ultimately unsuccessful strategy. Viceroy believes ProSieben is a highly leveraged entity with non-performing subsidiaries offering no synergies. ProSieben’s core business – which has carried ProSieben’s investment losses – appears to be in accelerating decline, with a potential death knell spurred by the EU’s implementation of its General Data Protection Regulation (GDPR).
- ProSieben’s acquisition and expansion strategy has been catastrophic, unfocused, and expensive – the company is currently attempting to control the damage caused. Many expensive investments are loss-making, hidden through segment accounting gimmickry, and offer no synergies. It is unlikely that ProSieben will be able to offset losses through divestment. There is no clear rhyme or reason to their business and such disjointed segments have proven difficult to manage and integrate.
- Viceroy believes ProSieben’s non-cash barter transactions have artificially boosted revenues by EUR 210m in 2016: almost 50% of net income. Viceroy believe ProSieben’s media-for-equity and media-for-revenue transactions will never be realized in cash because investments have been pulled from the bottom of the barrel. Despite classifying these transactions as revenue items, ProSieben does not appear to adjust its operating cashflows to reflect this non-cash item, as equity/investments are inherently not a working-capital account.
- ProSieben has subsidized a fabricated digital “growth story” using cash flows from its TV advertising business and idle TV advertising inventory. As its core business declines, ProSieben can no longer counterbalance its underperforming digital segments – the earnings structure is on the verge of collapse.
- Significant unmet financing needs and dividend commitments far outweigh ProSieben’s cash flows. We believe shareholders will inevitably be subject to increasingly dilutive equity raises. Outstanding amongst these are ProSieben’s acquisition-related put liabilities which amounted to EUR 366m as of EOFY 2016.
- ProSieben’s unconditional put liabilities have the characteristics of former management “bonuses” which bypass the consolidated income statement and stagger the company’s cash outflows (despite being unconditional). This allows ProSieben to consolidate entities (through majority ownership) without full cash outlay and minimizing P&L effects.
- ProSieben has lost at least 14 senior executives & board members in 2017 alone. It is very telling that almost the entire finance-related management team has left the company within that period. It seems the people most familiar with the true financial state of ProSieben have jumped ship. The collective Executive Board and Supervisory Board directly hold a mere 65,244 shares in ProSieben as of December 31, 2017. This is equivalent to 0.0% of the share capital.
- ProSieben is locked-in to new “output deal” contracts with major US studios to the tune of EUR 3,022m which it acknowledges does not meet the appetite of German viewers. Viceroy believe this will substantially increase costs in a declining market – a margin-trimming exercise.
- The head of ProSieben’s M&A team who processed an acquisition was employed by the seller a short period after. Viceroy believe the transaction was extremely favorable to the sellers.
- The Company’s dividend rates are fiscally irresponsible and unsustainable. Viceroy believes the capital raise in November 2016 which followed a large dividend payout was totally nonsensical.
Viceroy believes that ProSieben will be forced to issue another capital raise or cancel its dividend to zero to deal with these problems.
ProSieben displays all the signs of a business in an advanced state of decay in every operating segment. Viceroy believes that these issues have gone unattended for too long, and a correction is imminent as ProSieben’s market becomes stressed.
We value ProSieben at EUR 7.51 per share, representing a 75% downside on the closing price at March 5, 2018.
*Edit – 6 Mar 2018 – Correction on Figure 1.
A perfect example of why Viceroy don’t “engage with management” – they don’t answer our questions.
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Viceroy issued an open letter to Capitec’s board of directors on 20 February 2018, responding to their invitation to engage with management and field our questions.
A full copy of our letter can be found here:
Capitec replied to our letter on 22 February, 2018 via email, however provided no straightforward responses to any of our questions. At best, Viceroy received numerous largely insignificant statistics and tangential statements.
Capitec’s full response to our letter is attached to this report as Annexure 1.
Viceroy has been criticized for not engaging with management prior to publication of our reports. Capitec’s response is a prime example of why we choose not to. We maintain our recommendation that Capitec should be subject to an external, independent regulatory investigation, which we believe will result in Capitec being placed in curatorship in order to protect its consumers.
Viceroy present further evidence of MiMedx illegally selling on reimbursement, adding our already extensive evidence of pervasive fraud.
PDF Download Link
Viceroy has obtained documents detailing a legal dispute between MiMedx and Mad River Community Hospital (“Mad River”). The documents clearly outline MiMedx’s fraudulent sales methods including misrepresenting reimbursement rates for products and “marketing the spread”.
This report details the serious misconduct and underhanded sales tactics of MiMedx personnel in California, which executive management were certainly aware of given the ensuing litigation. As we have demonstrated over 20+ reports, these types of improprieties are commonplace throughout the organization. Never before have our legal advisors or consultants come across such gross and serious misconduct.
The Mad River documents also show MiMedx engaged in “selling on reimbursement”, contrary to a several laws and regulations and some alleged MiMedx policies.
- MiMedx sued Mad River for non-payment of invoices for EpiFix and AmnioFix products. Unfortunately for MiMedx this is where the story becomes compelling for law enforcement and regulators.
- MiMedx misrepresented to Mad River the reimbursement rates for its EpiFix and AmnioFix products, as well as misrepresenting insurer’s attitudes towards these products. Several insurers considered MiMedx products “experimental and un-reimbursable”.
- Following Mad River’s failure to pay, MiMedx sent “reimbursement” specialists to Mad River who upheld that MiMedx’s represented reimbursement rates were correct. Mad River believes that this was simply a manner of continuing the ruse while raising further invoices.
The Mad River filings portray (we believe accurately) MiMedx as third-rate con-artists.
Contrary to Parker H. Petite’s rhetoric of ‘Good Business Acumen’ and persistent denials of “marketing the spread”, this report will unlawful practices that MiMedx, including “marketing the spread”. This is the very tip of the iceberg as law enforcement and regulators have been made aware of.
It is Viceroy’s intention to continue the dialogue with MiMedx’s auditors and regulators to bring about the prosecution of Parker H. Petit.
In the wake of mounting evidence of fraud, illegal revenue recognition systems, retaliation against whistleblowers and concealing evidence from investors, we immediately call for Parker H. Petit’s resignation.