One of the biggest research frauds ever is exposed; The Five Worst SPAC Deals Still Above $5; The Billionaire Who Took Down Porn; The Battle Against the SEC's New Rules on Hedge Fund Activism; Crater Lake National Park

1) If you want an example of the important, socially beneficial work short sellers can do, look no further than this example...

In my e-mail on November 3, I wrote:

My friend and former student Gabriel Grego of Quintessential Capital Management just released a short report on Cassava Sciences (SAVA). The biotech company has a $2.3 billion market cap despite no revenue based on bullish expectations for its sole drug, Simufilam, which it claims will help treat Alzheimer's disease.

Gabriel's report, which you can read here, documents the shady backgrounds of many people associated with the company and concludes that there's no chance that Simufilam will ever be approved by the Food and Drug Administration ("FDA"). Here's an excerpt:

Simufilam, Cassava's only prospective drug, appears based on allegedly forged scientific research. Phase II trials have been conducted with numerous and serious irregularities, which appear to have allowed management to deceive investors about the effectiveness of the drug.

In our opinion, Simufilam is a worthless compound, and any touted benefit is likely the result of a combination of forgery, "cherry picking" of patients, and statistical manipulation of data, of which we have plenty of disturbing evidence.

This alleged exercise in deception has taken place with the involvement of an astounding number of questionable characters: Cassava's former Senior Clinical Research Associate is a convicted felon with a record in fraud and theft.

Cassava's prominent clinical research site (whose CEO is coauthor of critical research on Simufilam), IMIC Inc., is co-owned by a former escort, stripper, and crack addict with a criminal record for consumption and possession of cocaine. IMIC's Principal Investigator has been hit with a rare and ominous FDA warning letter during recent trials.

Cassava's CEO and CMO have been caught making allegedly fraudulent statements about Simufilam's predecessor Remoxy, which duly failed, devastating shareholders. Cassava's recent board addition, Richard Barry, has been involved with multiple frauds.

I'm not a biotech expert (to say the least) and haven't independently verified Gabriel's work, but knowing him and his track record, I have no doubt that his report is correct – which is bad news for this high-flying stock and its huge market cap...

Gabriel's key claim was that "Simufilam, Cassava's only prospective drug, appears based on allegedly forged scientific research." In a stunning validation, the prestigious magazine, Science, just published this article, Blots on a field?, which points to even larger fraud that's misled the entire field of Alzheimer's research for 16 years! Excerpt:

He identified apparently altered or duplicated images in dozens of journal articles...

But Schrag's sleuthing drew him into a different episode of possible misconduct, leading to findings that threaten one of the most cited Alzheimer's studies of this century and numerous related experiments.

The first author of that influential study, published in Nature in 2006, was an ascending neuroscientist: Sylvain Lesné of the University of Minnesota (UMN), Twin Cities.

His work underpins a key element of the dominant yet controversial amyloid hypothesis of Alzheimer's, which holds that Aβ clumps, known as plaques, in brain tissue are a primary cause of the devastating illness, which afflicts tens of millions globally.

In what looked like a smoking gun for the theory and a lead to possible therapies, Lesné and his colleagues discovered an Aβ subtype and seemed to prove it caused dementia in rats. If Schrag's doubts are correct, Lesné's findings were an elaborate mirage...

A 6-month investigation by Science provided strong support for Schrag's suspicions and raised questions about Lesné's research...

The immediate, obvious damage is wasted NIH funding and wasted thinking in the field because people are using these results as a starting point for their own experiments...

Schrag's work, done independently of Vanderbilt and its medical center, implies millions of federal dollars may have been misspent on the research – and much more on related efforts. Some Alzheimer's experts now suspect Lesné's studies have misdirected Alzheimer's research for 16 years.

"The immediate, obvious damage is wasted NIH funding and wasted thinking in the field because people are using these results as a starting point for their own experiments," says Stanford University neuroscientist Thomas Südhof, a Nobel laureate and expert on Alzheimer's and related conditions.

2) Speaking of short sellers, Edwin Dorsey of The Bear Cave, a newsletter that follows the sector, recently published this list of stinkers to avoid: The Five Worst SPAC Deals Still Above $5 (subscription required). Excerpt:

The Bear Cave sifted through hundreds of SPAC mergers to find the worst ones still trading above $5. Here's what we uncovered:

1/ Energy Vault Holdings ($6.57 share price, NYSE: NRGV – $879 million) describes itself as "a leader in sustainable, grid-scale energy storage solutions."

2/ Fisker Inc ($10.00 share price, NYSE: FSR – $2.97 billion) is a California-based electric vehicle company led by Henrik Fisker.

3/ Tattooed Chef Inc ($6.72 share price, NASDAQ: TTCF – $554 million) describes itself as a "plant-based food company" that sells healthy frozen items like cauliflower pizza, organic raspberry kombucha smoothie mixes, and Buddha bowls.

4/ Hims & Hers Health Inc ($6.06 share price, NYSE: HIMS – $1.25 billion) describes itself as "a multi-specialty telehealth platform focused on providing modern personalized health and wellness experiences to consumers."

5/ ReNew Energy Global ($6.88 share price, NASDAQ: RNW – $3.02 billion) is one of India's largest renewable energy and project development companies.

3) While Bill Ackman wasn't a short seller in this case, it's another example of an investor doing good...

In my June 28 e-mail, I wrote:

What a fascinating article on so many levels in the Financial Times (and kudos to my college buddy Bill Ackman!)... I suspect that the credit-card companies do a better job regulating the sector than any government would: Inside the secret, often bizarre world that decides what porn you see...

This article resulted from an in-depth investigation by Financial Times reporter Patricia Nilsson. I'm learning a lot from her new podcast about it, Hot Money: Who Rules Porn?

I finally had a chance to listen to the entire podcast and found it super interesting, especially Episode 5 about Ackman: The Billionaire Who Took Down Porn.

And here's another related article from the Wall Street Journal: What Porn Does to Teen Brains – and How to Keep It Off Their Devices. Excerpt:

Psychologists say it's important to talk to kids about porn without making them feel ashamed. Some exposure to it can be a natural part of development, they say, and porn shouldn't be shunned in a way that creates a taboo. They do, however, recommend using tech guardrails to reduce the chances that younger kids see things they're not ready to see. More on how to do that below.

4) Speaking of Ackman, he's mentioned in this in-depth article in Institutional Investor about activist shareholders' efforts to counter the SEC's proposed rule changes that could hurt them: The Ferocious, Well-Heeled Battle Against the SEC's New Rules on Hedge Fund Activism. Excerpt:

After Gary Gensler was tapped to head the Securities and Exchange Commission last year, it quickly became apparent that under his watch the SEC would pursue an aggressive agenda unlike anything the world of finance had experienced in decades. One result has been a wave of new rule-change proposals that has stunned Wall Street insiders who fear the end of the easy money enabled by years of lax regulation.

Take, for example, two proposed rules that deal with the disclosure of shareholder activists' stock and swaps positions – including the SEC's attempt to broaden the definition of investors acting as a group, forcing even more public disclosure.

Elliott Management Corp.'s Richard Zabel, the firm's general counsel and former deputy U.S. attorney for the Southern District of New York, set the stage for hedge fund activists' outrage at these proposals with a 32-page comment letter criticizing the SEC's new rules with arguments from constitutional issues to conflicts with judicial precedent.

"The commission has inexplicably decided to pursue new regulations that would effectively smother activism in the U.S. capital markets," Zabel wrote.

In addition to writing letters, Elliott's Zabel has met with SEC officials to press his case. So have executives from Third Point, Millennium Management, ExodusPoint Capital Management, D.E. Shaw, PDT Partners, Tiger Hill Partners, Marshall Wace, and Citadel, all of whom have met with the SEC as representatives for the Managed Funds Association and the Alternative Investment Management Association, the two hedge fund lobbying groups.

But the hedge funds aren't fighting the SEC alone: A new organization, which Institutional Investor has learned has at least one hedge fund backer, has enlisted dozens of academics to argue against the proposals, creating something of a firestorm of criticism.

5) On my drive from Eugene, Oregon to Mount Shasta yesterday, I stopped for a few hours at Crater Lake National Park and did some hiking and sightseeing. As you can see from these pictures, it's spectacular!

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.