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Remark CEO says Wolfpack Research claims his company is fraudulent are ‘misleading,’ ‘outdated’


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On Friday, CNBC’s “Fast Money” spoke with Wolfpack Research founder Dan David after the SEC confirmed it was investigating iQiyi, a company sometimes known as the Netflix of China, following his firm’s allegations that iQiyi was inflating its revenue numbers.

In the interview, David also took aim at a company called Remark Holdings, saying he believed the $119 million technology company was committing fraud and that the “chicken’s going to come home to roost” after a 30%-40% loss for the stock.

Remark shares closed nearly 8% lower Wednesday. The $1.20 stock is up more than 133% year to date.

“The filings that we have pulled from China show that the operations that they say they have a [variable interest entity, or VIE] contractual relationship with, which we don’t even believe is valid, do not match the numbers that they have here in the United States,” David told CNBC’s Melissa Lee referring to Remark. “They have $20 million lost more on their books here in the United States than they are showing in their SEC filings and credit reports in China. How do you reconcile that if they also say that they consolidate those financials?”

The short seller took particular issue with the fact that Barstool Sports founder Dave Portnoy, who runs a trading blog called Davey Day Trader Global, advises his millions of followers on investments such as Remark despite being admittedly “financially ignorant.” 

Portnoy told the New York Post this week that his bet on Remark may have cost him “close to seven figures.”

CNBC received a response Wednesday from Remark Holdings CEO and Chairman Kai-Shing Tao, who called the Wolfpack founder’s statements “misleading” and his information “outdated.”

Here is Tao’s rebuttal:

  1. Wolfpack’s key allegation is that we do not own our stake in Sharecare. This is absolutely false. As of June 30, 2020, we own approximately 4.5% of the issued shares of Sharecare. We also maintain Board representation. Finally, the litigation attempting to wrest control and compel Sharecare to assign them our interest, has now been resolved, as we recently paid in full all amounts owed to the Greenspuns in order to resolve this dispute relating to an earnout payment. Remark never ceased to own its ~4.5% Sharecare stake and the underlying judgment against Remark has now been paid off in full, so there is no longer any basis for potential seizure of that stake.
  2. Their argument that we don’t have proper VIE documentation, just because we didn’t publicly disclose all those docs, is wrong. We have standard VIE docs in place, including related loan agreements, that were drawn up with the assistance of Arnold & Porter, an internationally well regarded law firm, several years ago. VIE control may not be the same as direct, shareholder ownership, but it’s very common with Chinese companies controlled by foreign interests. In fact Alibaba, Tencent, Netease, and Baidu are some of the many examples of major companies who have structured their China business using VIEs.
  3. We initially sourced cameras and other components from various third parties, including HIKvision (whose cameras are still readily available on sites like Amazon), though we never shared any of our AI technology with them. We are now an ODM, an Original Design Manufacturer, for both our cameras and pads. We design the cameras and have hired a contract manufacturer to manufacture both our cameras and rPads. They build according to our design and specifications, and add our software. They manufacture according to our design and specifications. That is why it is now a Remark branded camera/pad. The technology and IP are controlled by Remark.
  4. 4. As to our investment into AIO, we originally planned to invest $1 million in the company, but after funding $500,000, we determined that the company wasn’t achieving the results we had anticipated and did not fund the remainder. CDRT subscribed FOR AIO’s 20% equity interests at a post money valuation of USD5 million, and paid in USD500,000.  In connection with that, AIO increased its registered capital from RMB1 million to RMB1.25 million [i.e., to reflect CDRT’s 20% interest], and the difference between USD500,000 and RMB250,000 was deposited to the capital surplus account which is not reflected as AIO’s registered capital.  This is very typical.  The comment from Wolfpack on CDRT’s capital contribution based on their purported review of the SAIC filing is flawed and seems intended to mislead or confuse Remark’s investors.
  5. Finally, they allege working capital and cash issues, which we have addressed in every one of our filings over the past few years, but Wolfpack Research inaccurately calculates working capital using 2018 figures, and they don’t show any source material other than saying tax documents in China to say show how we consolidated improperly under GAAP. We are a public company with well regarded auditors regularly reviewing our financials.
  6. As of June 30, 2020, our cash balances exceed $10 million and our debt has been paid down substantially.

Tao added, “We are proud to be helping our customers safely reopen their businesses and schools as they work to comply with the latest safety standards.”



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