Category Archives: Uncategorized

CFO of Houston retailer resigns

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George Bchara, 39, CFO of Conn’s, based in The Woodlands, has voluntarily resigned and will leave the company on December 1, 2023. Timothy Santo, currently the Chief Accounting Officer, will be the interim CFO. He will continue to conduct his CAO duties until a new Chief Accounting Officer has been hired.



Conn’s is a specialty retailer of durable consumer goods and has 171 stores in 15 states across the southern US. The average customer of Conn’s has a subprime credit score (defined as between 580-619).

The recent rise in interest rates provided a double whammy to the company. Its customers reduce their discretionary spending or find it harder to get credit and the company has to pay more interest on its debt.

For the six months ended July 2023, the company made a net loss of $69 million. Compared to the comparable period in 2022, retail sales fell 12%. Revenue from financing charges fell by 6% and bad debt expense rose.

Mr. Bchara originally joined the company in December 2016 as Chief Accounting Officer and was promoted to CFO in June 2019.

Mr. Santo joined the company in April 2023. He previously the Global Controller at PRA Group, a business that specializes in servicing non-performing consumer loans.

SEC Filing – 8-K

 

Perma-Pipe International Holdings appoints new CFO

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Perma-Pipe International Holdings has announced that CFO Bryan Norwood will retire, effectively immediately. He will be replaced by Matt Lewicki, who is currently the Chief Accounting Officer.

Perma-Pipe designs and manufactures specialty piping and leak detection systems. It has revenues of $140 million and a market capitalization of $66 million. The company appointed  David Mansfield, a Houston-based CEO, in 2016 and officially moved its head office from Illinois to Spring, TX in 2020.

Mr. Norwood, 68, joined the company in October 2018. He and Mr. Mansfield had worked together at Bredero Shaw, a pipe coating provider. Mr. Norwood also worked at Key Energy and API Perforating.

Mr. Lewicki joined the company in May 2023. Prior to that, from 2019 to April 2023, he was Corporate Controller for HMT Holdings, an oil and gas infrastructure company. Before that he spent six years at Quanta Services.

Mr. Lewicki will receive a base salary of $275,000.

SEC filing – 8-K Perma-Pipe CFO

Social Influencers charged in $114m Pump-and-Dump scheme

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Eight men have been indicted in a $114 million ‘Pump and Dump’ securities fraud that ran from January 2020 until April 2022. All have been arrested and will appear in court in Houston. There is both a criminal complaint filed by the Justice Department and a civil complaint, filed by the SEC.



The men allegedly manipulated stock prices by publishing false and misleading information on Twitter, on podcasts and through an online forum called Atlas Trading. Edward Constantin from Montgomery, TX and Perry Matlock from The Woodlands co-founded Atlas. Mr. Constantin, aka “MrZackMorris” had 551,000 Twitter followers while Mr. Matlock had 340,000.

Another defendant, John Rybaracyzk, from Spring had 267,000 followers and founded another stock trading forum on Discord. Other defendants are from Beverly Hills, New Jersey, Miami and Houston.

The scheme was simple. One or more of the group would buy a penny stock and tell the others in the group, allowing them to buy in at lower prices, prior to the manipulation. Then they would promote the stock to their followers. They would announce price targets, tease upcoming news and/or state their intentions to buy or hold their current positions.

After promoting the stock, they would sell their shares. Often they would continue to recommend their followers buy the stock, while not disclosing that they were selling their shareholding.

In the indictment, the first example given is of Camber Energy (CEI), a Houston-based penny stock. On August 3-4, 2021 three defendants bought a combined 2.2 million shares at an average price of 46 cents each. At 3.37pm on August 4, one defendant posts on Twitter and on Atlas “I added CEI for the swing… Last time it was at these prices, we went to $3”. Matlock posts on Atlas one minute later, echoing the sentiment.

Within the next four minutes, all three had sold a combined 465,000 shares after the stock rose by a penny. The cycle of promotional tweets and simultaneous sales happened five more times that day as the stock rose to 50 cents. Between August 3 and August 5, the three defendants made $54,989 through their misleading posts on CEI.

Constantin followed with a similar pattern and between September 1, 2021 and October 5, 2021, he made $4.3 million on buying and selling CEI stock.

It appears that someone known to all the defendants is working with prosecutors and helped build the case against them. The indictment refers to two unindicted co-conspirators. It also refers to private Discord chats between some of the defendants that were surreptitiously recorded.

That includes these two classics from one of the defendants, Daniel Knight (who lives in Houston);

‘Get caught? … We’re robbing f*cking idiots of their money…’

“. . . I mention a stock the less likely I get involved whenever all of Atlas gets a class action lawsuit . . . I’m playing this extremely smart, for the very long term. If you don’t think all
these f*ckers go to jail or at least get sued, you are crazy. . . .PJ is posting McLarens, $10 mill accounts, green 400 f*cking days in a row, come on. Every purchase over $10,000
immediately gets turned to the SEC. And it’s like everything he f*cking buys. . . . Just wait and see. . . . It’s market manipulation.

All defendants are charged with one count of conspiracy to commit securities fraud. Most are also charged with multiple counts of securities fraud. If convicted, each defendant faces a maximum penalty of 25 years in prison for conspiracy to commit securities fraud and each charged count of securities fraud. Constantin also faces a maximum penalty of 10 years in prison if convicted of engaging in unlawful monetary transactions.

Criminal Indictment

Construction services company appoints new CFO

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Orion Group Holdings has appointed Scott Thanish as its new CFO. He replaces Robert Tabb, who resigned in October 2021 to become CFO at privately-held Signal Energy Constructors.

Orion is based in SE Houston. The company was formed in 1994 to provide dredging and other marine construction services. However, it later diversified into concrete construction services. The company has revenues of over $600 million and a market cap of $96 million.

CEO and interim CFO Mark Stauffer was fired in April 2022. Chairman Austin Shanfelter took over as interim CEO until Travis Boone was appointed as its new CEO last month. Mr. Boone was a regional CEO of AECOM, an infrastructure engineering firm.

The root of the problems appears to be negative margins in the concrete segment, especially in the Austin and San Antonio regions, relatively new territories for the company.  The company had inexperienced management and weak relationships with customers in these regions and was unable to pass on cost increases.

Mr. Thanish joins from CHC Group, a private company providing helicopter services to the oil and gas industry. He has been CFO there for almost 5 years. He will receive a base salary of $425,000.

SEC filing – Orion Group CFO appointment

 

 

 

Shell to acquire rest of Shell Midstream in $1.9 billion transaction

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Shell has agreed to acquire all of the common units of Shell Midstream Partners it did not already own for $15.85 a unit, in cash. The transaction is worth $1.9 billion. Shell currently owns 68.5% of the common units.

Back in February, Shell had offered $12.89 for each common unit in a zero-premium bid.

Many years ago, Master Limited Partnerships were in vogue and it was the fashion for E&P companies to spin off their midstream assets into publicly-traded MLPs. Shell were fashionably late in that they only spun off Shell Midstream for $23 per unit in October 2014, right before the crude oil price crash.

That crash laid bare the claim that MLPs had low risks and therefore low cost of capital. In addition, the tax rules changed in 2018 reducing the benefits of MLPs. Most publicly-traded MLPs have already been taken private by their sponsor. Why pay a dividend of 8% on a MLP when you can bring it inhouse by borrowing at 5%?

The transaction has been approved by the Conflicts Committee but most minority investors remain unhappy as they believe that the deal undervalues the company, particularly as some of the midstream assets were damaged by Hurricane Ida in 2021.

The transaction is expected to close in the fourth quarter of 2022.

SEC filing – Shell to acquire Shell Midstream Partners

Houston CFO leaves after 10 months with $3 million severance

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Eric Javidi, CFO of Archaea Energy, is leaving after ten months with a $2.95 million cash severance. In addition, six weeks ago, the company gave him stock worth $3.6 million that is now fully vested.



No reason was given for his departure. The company has started a search process for his replacement.

Archaea develops, constructs and maintains renewable natural gas facilities (RNG) that capture waste emissions from landfills and converts them into low-grade fuels and electricity.

The company is based in the Galleria area and was taken public in September 2021 by a SPAC based in Pennsylvania, Rice Acquisition Corp.  The SPAC actually acquired Archaea LLC for $347 million and Aria Energy LLC for $680 million, with the combined business being renamed Archaea Energy. The stock is trading at around $18, similar to the price when the deal closed.

As an aside, the Rice family are the majority owners of both the SPAC and Archaea LLC.

Mr. Javidi joined Archaea in April 2021, the same month that the deal with the SPAC was announced. He was previously the CEO of Southcross Holdings and a Managing Director at Kayne Anderson Capital. Both companies are primarily involved in energy infrastructure.

Severance and Stock Award

The base salary and employment contract for Mr. Javidi has never been publicly disclosed, so it is not clear how the $2.95 million severance was calculated. We do know that the company awarded Mr. Javidi 140,000 fully vested shares on December 29, 2021. Mr. Javidi promptly sold 55,090 shares for $949,200. He was also awarded 62,750 shares that were due to vest in 2024. With his severance, these are now fully vested.

General Counsel leaving after 7 months

The company also announced that Lindsay Ellis, General Counsel, is also leaving. She has only been with the company since July 2021. No details of her severance were disclosed. She also granted 33,333 restricted shares that have now fully vested, worth $600,000.

The company thanked Mr. Javidi for building out the company’s financial functions and Ms. Ellis for building the legal and HR functions. Undoubtedly, going public at the same time as trying to combine two businesses is a very stressful and complicated affair. It’s not clear what went wrong.

SEC filing – Archaea CFO departure

Archaea Investor Presentation – April 21

Houston Biopharma misled investors in $40 million offering

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Kiromic Biopharma, based in the Medical Center, has fired its CEO for misconduct and also admitted it misled investors during a $40 million public stock offering in 2021.

The company is developing immuno-oncology therapeutics for the treatment of blood cancers and solid tumors. It went public in October 2020, raising $15 million at $12 per share. It raised a further $40 million in July 2021 at $5 per share. The shares now trade at $1.



On August 17 and 23. 2021, then CFO and Board member Tony Tontat submitted substantially identical reports through the company’s complaint hotline. The complaints pertain to the company’s public disclosures with the SEC regarding the anticipated timing of the US Food and Drug Administration (FDA) authorization of its drug applications and the anticipated timing of human clinical trials.

The complaints were passed to the Audit Committee of the Board. In turn, the Audit Committee recommended the Board form a Special Committee to investigate. After engaging outside counsel (Sidley Austin) and AlixPartner, the Special Committee reported on its findings to the Board on February 2, 2022

FDA Clinical Hold

In short, the company received communications from the FDA  on June 16 and June 17, 2021 that the FDA was placing two new potential drugs on clinical hold. A clinical hold means the company has to suspend ongoing clinical work. The formal clinical hold letters were received from the FDA on July 13, 2021.

On July 16, 2021, the company issued a press release disclosing it had received comments from the FDA but did not mention the term ‘clinical hold’. It was only on August 13, 2021 that the company disclosed this fact.

These dates are important as the company filed its S-1 Registration Statement on June 25 without mentioning the correspondence from the FDA on the clinical holds. It closed its IPO on July 2, 2021. That lack of disclosure will trigger even more shareholder lawsuits.

Disclosure Committee

The SEC filing doesn’t explicit state who in the company knew what and when. The Special Committee did recommend the formation of a Disclosure Committee comprising the CEO, CFO, General Counsel, the Corporate Controller and any Executive in charge of FDA submissions. Their role is to ensure timely and accurate disclosure of relevant information to investors and the SEC.

CFO lied about his education

For good measure, the Special Committee also found that Mr. Tontat lied to the company about his educational background. Instead of a BA in Economics from Harvard University, he received a Bachelor of Liberal Arts, a degree conferred by the Harvard Extension School.

Mr. Tontat resigned as CFO in October 2021, with Dan Clark, VP of Finance, promoted to interim CFO. The SEC filing announcing Mr. Tontat’s resignation stated that it was due to personal reasons and did not relate to any disagreement with the operations, policies or practices of the Company on any matters.

CEO fired

CEO Maurizio Chiriva-Internati was terminated for cause on January 27, 2022 after the Special Committee found ‘evidence of conduct that the Board believe was inconsistent with the Company’s policies.’

Pietro Bersani, a current member of the Board, has been appointed interim CEO while the company searches for a permanent CEO.

SEC filing – Kiromic Biopharma fires CEO

 

ExxonMobil to move head office to Houston metro area

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Gary Coronado/Houston Chronicle

ExxonMobil has announced that they will be moving their head office from Irving, TX to their campus in Spring, TX. The move will be completed by mid-2023.

Exxon has a market capitalization of $319 billion. When it relocates, it will be the largest in Houston, by market cap.



Exxon moved its head office from Manhattan to Irving in 1989. The current head office is 365,000 square feet and houses 250 employees, who have been offered relocation packages. Last year, Exxon put up for sale 50 acres of vacant land around its headquarters. In addition, it owns another 50 acres in the area.

Construction on the campus in Spring began in 2011 when oil was over $100 a barrel. It was completed in 2015, when oil was below $60. It is based on 385 acres and officially houses 10,000 employees. The campus is currently appraised at $890 million.

ExxonMobil also announced a reorganization as part of efforts to save $6 billion in cost savings by 2023;

  • The Downstream and Chemical segments will be combined into a segment called Product Solutions.
  • The US and International Upstream businesses, previously run separately, will be consolidated into one organization
  • A new segment called Low Carbon Solutions will be created.
  • Technology and Engineering groups will be combined into one shared service for the segments.

The cost-cutting is probably the result of pressure by an activist investor, Engine No 1, who won three seats on Exxon’s board in June 2021, despite only owning 0.02% of the stock.

In July, the company hired Kathryn Mikells as its new CFO. She joined from Diageo PLC, a drinks manufacturer and is the first woman to be appointed to the Executive leadership team at Exxon.

ExxonMobil news release

 

BP Midstream Partners to be acquired by its former parent

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BP Midstream Partners (BPMP), based in west Houston, is to be re-acquired by its parent, BP, in an all-stock transaction. Each unitholder will receive 0.575 of an American Depositary Share of BP for each public common unit owned. At the current price of the ADRs, that amounts to $14.89 per unit

Back in August, BP offered to buy BPMP common units at $13.01 per unit. BP currently owns 54.4% of the outstanding BPMP units.

BPMP owns the pipelines and other midstream assets that service BP’s Gulf of Mexico’s fields as well as the pipelines around the Whiting refinery in Indiana.

BP Midstream was spun off by BP only in October 2017 at $18 per unit. That was a few years later than many of its competitors. In fact, the trend to re-acquire them started shortly thereafter in 2018.

The deal is expected to close in the first quarter of 2022.

SEC filing – BP to acquire BPMP

 

 

Katy woman pleads guilty to defrauding BP of $2.3 million

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A Katy woman, Angelica Garcia-Dunn, has pleaded guilty to defrauding BP.  Ms. Garcia-Dunn was the founder and CEO of Aim Global Logistics, a freight forwarding and logistics company.



She contracted with BP to act as an escrow agent in which she would make payments on BP’s behalf to BP’s railcar lessors and repair vendors. Between July 2018 and September 2019, BP made payments totaling $2,282,148.53 that Ms. Garcia-Dunn was supposed to use to pay the BP vendors. Instead she diverted the money to either pay other business obligations or to her own personal account.

Most of the money diverted was used to pay business creditors. However, Ms. Garcia-Dunn transferred at least $80,000 to her personal bank account.

The scheme went undetected for so long because Ms. Garcia-Dunn used later payments from BP to pay earlier vendor invoices that had not been paid due to the misappropriation of BP funds. As an accounting fraud, this is known as  ‘Teeming and Lading’.

Sentencing is set for September 30. At that time, Ms. Garcia-Dunn faces up to 20 years in prison and a possible $250,000 maximum fine. She will remain on bond pending that hearing.

https://www.justice.gov/usao-sdtx/pr/katy-resident-admits-fraud