MDXG - MiMedx Group

[Gregmal]

Gregmal, reading into your first post this definitely did not seem a ‘short term play’ from your side. Based on that post I would have said you sold this more as a long term bet where the ‘risk-reward was heavily skewed to the upside’.

 

Here we are, the stock 50% lower less than 1 month after your initial post, and you act as if you nailed it?

 

Sorry, but I agree that this idea does not belong on a value investing board.

 

Except for the stock rocketing 60% higher two days after the post.

 

Again, it would appear to me, on this board, nailing it is buying some value investor consensus stock and riding it into oblivion as you all feed into each other’s biases...like there is shame in making money on a trade... to rich.

 

Again, not on a value board? Go talk Tesla or FNMA.

[Cigarbutt]

FWIW, I would say that this "idea" was a candidate for discussion and wonder if limitations may not hinder further tough discussions that may be necessary for other names.

 

Earlier in this thread, a poster disclosed a short position on the stock and this is the kind of work that is sometimes necessary to facilitate price discovery on the way down. The white-knuckle moment displayed by Mr. Cohodes (link submitted by JohnHjorth) suggests that it does not need to get so personal but red flags are red flags and a short seller needs to buy from somebody.

 

Having said that, apologies to Gregmal for the following:

 

In sensitive discussions, you tend to cross red lines and, in this case, you did not cross a red line but the elements that you described (even if "worked" or will "work" again in terms of a realized gain) were weak for a value-based board. I can live with the cavalier attitude (simple and easy) but submit that you should have substantiated your case more solidly in this controversial name, especially as an opening poster.

[alwaysdrawing]

EY Resignation Letter

 

https://www.sec.gov/Archives/edgar/data/1376339/000119312518344985/d628135d8k.htm

 

During this same period, there were the following “reportable events,” as that term is defined in Item 304(a)(1)(v) of Regulation S-K:

 

 

 

•

EY advised the Company that the internal controls necessary for the Company to develop reliable financial statements do not exist;

 

 

 

•

Although EY could accept representations from the current Interim CEO and Interim CFO based on their knowledge, EY advised the Company that EY is unable to rely on representations from them because, as of the date of the resignation, the current Interim CEO and Interim CFO, in turn, would have needed to rely on representations from certain legacy management personnel still in positions that could affect what is reflected in the Company’s books and records. At the time of EY’s resignation, the Audit Committee’s independent investigation was still ongoing;

 

 

 

•

EY advised the Company of the need to significantly expand the scope of its audit, due to material allegations of inappropriate financial reporting, material allegations of noncompliance with laws and regulations, the findings to date from the independent investigation conducted by the Audit Committee into these allegations, and the lack of internal controls necessary for the Company to develop reliable financial statements. EY had not completed the necessary work in connection with this expanded audit scope at the time of its resignation; and

 

 

 

•

EY advised the Company that information has come to EY’s attention that EY has concluded materially impacts the reliability of previously issued financial statements, and the issues raised by this information have not been resolved to EY’s satisfaction prior to its resignation.

[John Hjorth]

Holy Moly! [ 0_0 ] I don't recall to have seen an auditor resignation letter like this - ever - for a listed company. Tim's post comes to mind.

 

.

[Gregmal]

Out at 1.65. As they say here, Cheers!

[Gregmal]

Out today, some real research, basically supporting some of the drivers I mentioned.

 

https://www.presciencepoint.com/wp-content/uploads/2019/01/Prescience_Point-MiMedx_MDXG-Long.pdf

 

I no longer have a position, but it was so obvious after the delisting that at this point, the stupid retail money was on the short side. Had good laughs reading about people who bought puts and then couldn't get a bid when wanting to sell them. The share price has now more than doubled following "the worst auditor resignation ever!!!", which was supposed to immediately take the company to 0.

 

Will be interesting to see this continue to play out.

[LongHaul]

Isolated comment:

 

The flaw in the writeup is that they are looking at Free Cash flow Conversion when a big chunk of the FCF

came from share based comp addbacks.  Assuming they pay cash to employees vs the share comp then much of the FCF disappears. 

 

I have no idea what long run profitability here could be.

 

Free Speech

 

I think free speech on ideas is important whether you are long or short and Greg's post was fine.

This is a marketplace of ideas and you are free to choose to discard any and all. 

Censoring disconfirming opinions is a horrible practice.  It is bad when when the longs try to do it to the shorts and vice versa.  Ultimately the truth comes out on companies no matter what anyone owns or says.

 

And by they way, I have noticed that given human nature for all of us it is best to pay particular attention to disconfirming evidence.  Too many smart people just brush stuff under the mental rug and they eventually pay for it.

 

 

 

[John Hjorth]

LongHaul,

 

Personally, I think that you somehow misinterpreted the posts in this topic related to Greg's actions with this stock. To me, - what you & I experienced here, - was actually exactly the outcome of free speech. That said, push back can get pretty dense at times. Greg seems to be up to it. So, all OK.

 

Only Greg is responsible to himself [and perhaps others with capital under his control] about which buttons he's pressing on his keyboard, and when.

[Gregmal]

First off, I agree with your assessment Longhaul, and yes, good observation about SBC.

 

Second, while unorthodox, pushback is one of the most valuable, parts of the due diligence process. Bruce Berkowitz labels this aggressive pushing of contrarian points "trying to kill the thesis". That said, there are a ton of sensitive babies here. I try to pushback, sometimes even with the counterpoints on positions I like, mainly because there are so many excuse making circle jerks going on here with the pop stocks like FB, FFH(although here we've had some good quality talks lately) and AAPL, just to name of few of the current ones. The investment process is different for all, but I mean, I thought my 2018 returns were kind of meh, then I see what others here are posting and it just kind of confirmed what I've long thought about a lot of the people here...I'll leave it at that.

 

Third, this thread was amusing to me. Specifically Alwaysdrawing. I don't normally call people out on a personal level, but what a jackass. He's playing the concerned citizen, getting all outraged that I suggest an idea(a profitable one, which is a rarity on this site of late), ridiculing me and making embellished claims, some of which are a matter of opinion, and stating them as fact, and most egregiously, accusing ME of pumping my position, when I think my behavior in terms of posting my exact to the moment entries and exits here, was as transparent as I've seen on this site. And then weeks later, in a different thread, this jackass lets it slip he's just another short here. So in other words he was pumping HIS POSITON in a dishonest and nontransparent way. Good lord. I've already made my money here.... So I wish him the best.

[John Hjorth]

Greg,

 

To me, you were not investing here. Also dead on phrased in this topic by Cigarbutt.

[Gregmal]

Hi John,

 

Traditional, WB/Graham inspired value investing, probably not. Agreed.

 

However I consider investing to have multiple definitions. I consider using myriad angles, theories, data points, OR multiple combinations of all of those things to find exploitable opportunities, or mispricings, to be a form of investing. At the end of the day, making a buck is the goal. Then growing that buck. To me, value investing is just as much about exploiting mis-pricings as it is about anything else. So when a bunch of situations occur that to me indicate too many fat kids on one side of the see-saw, sometimes all you have to do is wait for them to get off. Not for everyone, sure. Hard to quantify, sure. Maybe skill, maybe luck, maybe we never find out.

 

I've noticed, especially with some responses here, that some rather wear badges of honor "investing" in the tried and true, textbook ways, even if it means negative, or mediocre returns, than make money entertaining more unorthodox approaches. Different ways to skin a cat so to speak but many times, especially with the markets, pattern recognition is big. You have the fundamental analysis crowd, and the technical analysis crowd. You have some that try both. I try not to box myself in, but rather prefer a "go anywhere" approach, if the situation makes sense.

 

This is a community and sharing potentially profitable ideas shouldn't be attacked. I've seen bozos with one post come here and post promo shit about penny stocks. And they get attacked, sure... I get that. But whining and sour grapes(over an idea that made money nonetheless) because the idea doesn't fit YOUR model of "investing" is stupid. No one is forced to follow, read, or invest. If people don't like it? Then move on...

 

 

EDIT: I'd add, back to MDXG, as an investor, I don't know how this whole thing isn't fascinating to people. At some point probably in the next 6 months, there will be a massive amount of money to be made on one side of this trade, for fundamental reasons. Why wouldn't it be worth keeping tabs on or trying to figure out what side that money will be made on?

[BG2008]

Investing is kind of like poker.  Overtime, you learn to calibrate each other.  A wise fellow on this board told me years ago that I was pretty good in real estate.  He also correctly pointed out a few others who do good work in specific industries.  I think I learned a bit more about some of you guys via this thread. 

 

[alwaysdrawing]

Ultimately, what's left of this situation is a black box, and I still would advise folks who haven't been involved previously here to stay away.  Without good financial information, including cash on hand, legal expenses and audit expenses, DOJ/SEC liabilities, and much of any communications with shareholders, there is little to base any judgment on, except what caused the collapse from $17/share to $2/share in a year.

 

Prescience Point's presentation makes some good points, and my two cents is that there is a viable business within MDXG, however, they are too much discounting the legal and accounting costs, as well as any civil and criminal liability that the company has.  The auditor resignation is a big sign of the extent of those problems, as the restatement costs are fantastic fees for accountancies, and it takes an extremely bad situation to cause an auditor to resign using such strong language.  If Prescience Point was correct that the problems have been overstated, I don't see how that meshes with the auditor resignations.  The economics of the business are not as rosy as Prescience presents, as share based compensation to employees (as well as potential bribes to practitioners) are much different at higher share prices and with the current evidence of impropriety. I also think it's early to judge what, if any the civil and criminal liabilities are without any disclosure of resolution.

 

With that said, I'd agree with Prescience that the equity represents an option, where the downside is 0 in the event of bankruptcy, and possibly multiples of the share price if there are no further issues and what issues exist can be resolved at minimal cost.

 

My guess is that post-bankruptcy, MDXG can reorganize into a smaller entity with reasonable economics, and I suspect that the current holders will not be the beneficiaries of that.  I still expect that bankruptcy will be coming sooner rather than later to protect the company from the liabilities that they face, that are mostly not reflected on the most recent balance sheet, which is a year stale.

 

I do have a long-term position in puts on the company, that expires in January 2020, and which cannot be traded except to close the position.  I do not have any other short position, and haven't been trading in and out of the name, except to close some December 2019 puts before expiration.  As new put positions can't be opened, I don't have any trading advice except to say:  be careful out there.  Some people know how to trade in and out of these situations profitably, but I do not, and although I see the common stock equity as an option in this situation, I think the odds are stacked against it paying off.  With such little disclosure, I can't be sure what is actually going on at the company right now, and I'm not sure that many do besides insiders, and even they cannot see the other side of the table at the SEC and DOJ.

 

 

[Gregmal]

This is now a multi bagger from the 8K heard 'round the world that many called the worst they'd ever seen and claimed was the death knell.

 

For myself, unfortunately I did not have the discipline to see this through entirely. But just goes to show following the crowd can be dangerous and blind people to opportunities. I mean at one point this was priced as though bankruptcy and judgments/penalties were known and appeals were exhausted when anyone with an understanding of the legal process knows at best, it would be 6-12 months before any of that even starts to occur.

[Gregmal]

https://seekingalpha.com/pr/17528684-mimedx-announces-comprehensive-board-refreshment-plan-cooperation-prescience-point

 

Fraud going to zero, right?

[benhacker]

https://seekingalpha.com/pr/17528684-mimedx-announces-comprehensive-board-refreshment-plan-cooperation-prescience-point

 

Fraud going to zero, right?

 

With comments like this, might be best forum hygiene to state whether you have a position, and what variety.  My 2 cents (no position).

[cameronfen]

https://seekingalpha.com/pr/17528684-mimedx-announces-comprehensive-board-refreshment-plan-cooperation-prescience-point

 

Fraud going to zero, right?

 

With comments like this, might be best forum hygiene to state whether you have a position, and what variety.  My 2 cents (no position).

 

Just to defend greg.  He did say he was long and then sold out.  Also in the context of this thread both longs and shorts pretty much admitted this was either a multibagger or a zero, so his comment was not all that controversial.   

[Cigarbutt]

Follow-up and some kind of reflection on the state of healthcare in the US.

 

Disclosures:

-I think the US in this space does things that are great but also that are not so great.

-This analysis is based on an individual appreciation of the fundamentals and (like in the VMD thread where it appears that I was wrong or early which can sometimes be equivalent) being right on the process does not preclude the possibility to make a lot of money as MDMX equity has done really well since the introduction of the topic.

 

The emphasis here is not about the accounting and reporting red flags, it's about the fundamental value of the products. There has been considerable delay with various disclosures and some entities are ready to finance the rough patch so here are some relevant numbers for this post.

 

                                                                                2014          2015          2016

Total sales                                                                118.2        187.3        245.0

-sales from wound care                                                93.6        141.1        184.0

-sales from 'surgical' products and to MD offices            24.6          46.2          61.0

(injectable stuff)

 

For the wound care, the growth is impressive but the placental, amniotic and umbilical cord products' effectiveness is based on poor and inconclusive evidence and many trials are sponsored and targeted "to support coverage and reimbursement".

For the injectable stuff, the same conclusion applies and the evidence is even weaker.

This has been discussed even in mainstream investing publications:

https://www.wsj.com/articles/va-bans-injectable-wound-care-products-from-mimedx-and-other-companies-for-many-uses-11560529012

 

I recently (yesterday) came across a report which was quite certainly not sponsored and takes a look, from the research angle, at how incentives could interact with the true efficacy of the product. The study covered the 'alternative' options used by relevant MDs in South Florida when dealing with a significant part of the addressable market (knee pain). The medical clinic revenue per patient if treated with a standard cortisone shot = $188.54. The medical clinic revenue per patient if treated with stem cell therapy-type of injection = $1200 to $6000, with a mean of $3100 and often a requirement for cash-only payments. One has to deduct the cost of procurement of the product which is different in both cases. In Canada, moderate efforts could obtain the products for about 5-10 bucks and, given the typical cost differential for the exact same items, in the US, I assume the cost could be in the $20 to 30 USD range. Because of the opaque nature of the 'alternative' market, it is hard to obtain and assess the impact of the cost of the stem cell therapy product. Very reasonable assumptions however suggest that the clinic/MD can multiply the revenue and exponentially multiply the bottom line by using a product backed with questionable evidence at best. What would you do and what does it mean for the value of the stem cell products?

 

The US is a great place for innovation (and also a great place for excesses). In the nineteenth century, the US was the place where innovation and entrepreneurs of various sorts allowed to be at the forefront for the development of the petroleum industry as we know it today. This was a revolution and started really when kerosene was developed to replace whale oil and lard as the primary source of light. But the 'product' initially was destined for a completely different market and the FDA did not exist but one has to wonder if the FDA really exists today. The adventurous Samuel Kier played a role and made a lot of money with the transformation but his adventure started by using the salt mine contaminant (I guess like the discarded placentas story of today) and selling it as petroleum syrup famed to cure just about anything, including "rheumatick" complaints. The evidence used by Mr. Kier was formed when he discovered that the product was prescribed for his wife who suffered from tuberculosis. The story does not say if the wife healed but the investor saw a profit opportunity. Mr. Kier then did not have to worry about the SEC or the FDA and used the following publicity:

 

"The healthful balm, from nature’s secret spring,

The bloom of health and life to man will bring;

As from her depths the magic fluid flows,

To calm our sufferings and assuage our woes."

 

All that to say that stem cell therapy offers great promises which are likely to come from a direction that remains, to this day, at the margin of acceptable and known evidence. What disturbs me tough is that the margin of clinics in South Florida offering and recommending the 'alternative' stem cell therapy was 24.5% and 58% of those clinics were not transparent on price. When reading about the early development of the oil industry and the role that Mr. Kier played in it, I learned a new expression which has been described as a euphemism for a specific kind or marketing.

 

[Gregmal]

https://www.streetinsider.com/Corporate+News/MiMedx+Group+%28MDXG%29+Confirms+%241.5M+Settlement+with+SEC/16182232.html

 

L.O.L....

 

"The SEC says the company agreed to pay $1.5M to settle the case, without admitting or denying wrongdoing."

 

But as usual, everyone missed the forest for the trees. Fraud = Zero, right?

 

 

[Cigarbutt]

https://www.streetinsider.com/Corporate+News/MiMedx+Group+%28MDXG%29+Confirms+%241.5M+Settlement+with+SEC/16182232.html

 

L.O.L....

 

"The SEC says the company agreed to pay $1.5M to settle the case, without admitting or denying wrongdoing."

 

But as usual, everyone missed the forest for the trees. Fraud = Zero, right?

This story is above my abilities in terms of feeling where the wind is going but it continues to be quite entertaining. It must be tough to be a short seller looking for catalysts but this story may have several chapters as I understand that some people still have qualms about other allegations including the value of the underlying 'products'. FWIW, the FDA and other authorities have decided to look into some of the innovative stem cell related products. This process will evolve over some time and perhaps a few years and will, at least initially, be a positive as there will be an increased interest. The potential negative is that the fundamental value of the products may end up with a clearer definition in terms of efficacy. I thought Mr. Nocera did a good job reviewing the game dynamics of this story and the third link (with an attachment) may be interesting for those who have an interest in forensic accounting or who actually shorted the stock during the eventful period.

https://www.bloomberg.com/opinion/articles/2019-08-19/short-seller-marc-cohodes-goes-too-far-in-mimedx-campaign

https://www.bloomberg.com/opinion/articles/2019-08-22/mimedx-has-changed-but-short-sellers-like-cohodes-can-t-see-it

https://www.justice.gov/usao-sdny/pr/former-chief-executive-officer-and-chief-operating-officer-publicly-traded

[Gregmal]

https://www.streetinsider.com/Corporate+News/MiMedx+Group+%28MDXG%29+Confirms+%241.5M+Settlement+with+SEC/16182232.html

 

L.O.L....

 

"The SEC says the company agreed to pay $1.5M to settle the case, without admitting or denying wrongdoing."

 

But as usual, everyone missed the forest for the trees. Fraud = Zero, right?

This story is above my abilities in terms of feeling where the wind is going but it continues to be quite entertaining. It must be tough to be a short seller looking for catalysts but this story may have several chapters as I understand that some people still have qualms about other allegations including the value of the underlying 'products'. FWIW, the FDA and other authorities have decided to look into some of the innovative stem cell related products. This process will evolve over some time and perhaps a few years and will, at least initially, be a positive as there will be an increased interest. The potential negative is that the fundamental value of the products may end up with a clearer definition in terms of efficacy. I thought Mr. Nocera did a good job reviewing the game dynamics of this story and the third link (with an attachment) may be interesting for those who have an interest in forensic accounting or who actually shorted the stock during the eventful period.

https://www.bloomberg.com/opinion/articles/2019-08-19/short-seller-marc-cohodes-goes-too-far-in-mimedx-campaign

https://www.bloomberg.com/opinion/articles/2019-08-22/mimedx-has-changed-but-short-sellers-like-cohodes-can-t-see-it

https://www.justice.gov/usao-sdny/pr/former-chief-executive-officer-and-chief-operating-officer-publicly-traded

 

Indeed. They say Cohodes went too far, and I agree with regard to the investment. You can see it today with his cheerleading even though, shorts have gotten blown up here(of which I presume he is still one). So obviously it is more emotional than financial, and given what Marc went through, I completely sympathize with him and kind of give him a pass for his behavior. The rest though, from both long and short side, I found to be disgusting. One of the things that unfortunately weighed on my decision to exit this early was in fact the vitriol and rhetoric here; something I was completely unaware of when posting the thread and something I only started seeing afterwards. With further due diligence, looking at other forums and platforms it became apparent to me that this was just a mess. Longs threatening shorts, shorts threatening longs...pieces of shit all around. Investing should be fun and like any other event in life, when its not, its time to move on. When people cant even have an opinion or investment thesis without being attacked, well, thats reprehensible to me and not something I wish to(publicly) be a part of.

 

The writing was on the wall though. The SEC literally never puts companies out of business, so betting on zero was obviously a bad bet. As usual though, people tend to focus on the wrong things. A simple observation is that when EVERYONE is focusing on something, that something really doesnt matter anymore because its likely priced as efficiently as possible. Like when everyone(myself included) was railing on Apple's reliance on the iPhone, well, iPhone numbers didn't matter anymore because the price reflected that. Same was the case here with the restatement. Now, its a little murkier as you allude to. I think the event driven trade is over and now one needs to be an expert on something here to make money.

[Cigarbutt]

^Just a small add-on because it may not have been picked up by the market. The market for 'biologics' can be separated in different categories but the platelet-rich stuff contains a comparable profile of 'factors' versus the placental stuff. There have been interesting studies that came out recently that are shining a light at the murky picture. The last one I've seen is a well done study comparing the injection of factors with the injection of nothing in a context of 1-a recent injury, 2-direct injection at injury site and 3-looking for repair potential only and not regenerative potential for degenerative conditions which would be much harder to achieve, an ideal context to show any benefit, if there is one.

https://www.ncbi.nlm.nih.gov/pubmed/31748208?dopt=Abstract

In a transparent world, how much would you pay for zero benefit?

[Spekulatius]

My own opinion is that MDXG product are probably not providing any benefit, but I am not an expert on this.

 

Mark Cohodes is in this short not for the money ( as he stated in the Jolly Swagman podcast), but out of principle and this has become a very personal vendetta.

 

So if you are in the market to make money, it’s probably best to stay out of this. anyways, even with frauds or worthless junk, the stock price can become very disconnected from reality.

 

I jokingly said for example, that the best time to invest in SHLD was after it filed. The stock went from $0.25 to ~$2.5 briefly after they filed. Similar, GM stock during the financial crisis showed either immediately before of after bankruptcy (about Nov 2008) a strong run, even thought the stock was basically known to be worthless. I think it was solely due to technicals and got a lot of shorts wailing.

 

So weird thing can happen and it is possible to do counterintuitive gambles where the payoff can be quite large in stocks that are absolutely worthless.