▶If you missed my squib earlier this week on the SEC’s proposals to “make IPOs great again” by lowering disclosure, along with a few other head-shakers, you can read it here…

In response, Olga Usvyatsky, who specializes in forensically digging deep through filings in her Deep Quarry newsletter, responded…

I have mixed feelings about that. Do we really believe that fresh IPOs have effective controls? And if not, is there a value in the attestation report beyond confirming that controls are ineffective or, in some cases, give investors a feeling of false security?

I responded…

As always, you ask a great question, Olga.

To me, it’s the simple issue: Less disclosure is not good for investors, most of whom these days couldn’t care less. Plus, EVERY company, it seems, is tagged for internal control issues. But with a less effective SEC and fewer disclosures, it would appear you’re setting the stage for less ethical management to seize the moment for their own good, with less oversight.

On the other hand, if passed as proposed, it will unblock the logjam in private equity, while at the same time lowering the overall cost and regulatory burden of being public… which may have swung to an extreme.

Now we’re swinging the other way, but mark my words: We’ll swing back, maybe to the middle, after the next “big one” because there WILL BE another big one, a-la Enron. People are people. Every generation throws a hero up the pop charts… fudging here, fudging there, thinking they’re smarter than they really are… and that nobody will notice, until they’re addicted.

And then they implode. And people point fingers. The politicians rush in. New regulators are embraced. Etc. Etc.

Wash. Rinse. Repeat. ;-)

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▶I’m just opining from the far right field bleachers, of course, so let’s turn to my old friend Lise Buyer, who knows a thing or two about IPOs from being on the field. I first met Lise decades ago when she was a mutual fund tech analyst, then a sell-side tech analyst during the dot-com boom/bust, then at Google, where she was deeply involved in its IPO.

Here’s what she wrote on LinkedIn the other day, in response to the proposal (highlights by me)…

Great. Last time the regulators moved to "encourage" IPO activity, they did so via the JOBS Act, which, among other changes, eliminated the 500 shareholder rule. In doing so, they paved the way for private investors to exclude the public from the opportunity to invest when companies were, in general - there are always exceptions - in their most rapid phases of growth. The result? Unprecedented private market activity, the rise of massively funded, highly valued private companies, and a sharp decrease in the number of IPOs.

Now - the proposal above insures that potential IPO investors, those buying in as the early investors, look to harvest their rewards, have less information, delivered less frequently.

Exactly who thinks adding incremental risk to the new issue market makes it more attractive? It may make it easier for issuers, but last I checked, markets need two sides. Skewing toward one side may be screwing the other...

Want more IPOs? Reinstate the 500 shareholder rule or an updated equivalent based on private round valuation. If a company has enough scale and enough shareholders, require it to file its financials publicly. There would be no IPO requirement, there never has been such a thing, but the obligation to share audited financials would both strengthen a company's internal financial muscles and be a catalyst toward a public listing - just as it was years ago for Google and (at the time) Facebook, among others.

There are ways to stimulate the IPO market for companies beyond the behemoths that may have drained the private wells. Less information for potential investors is not one of them.

Unless, of course, you're a grifter… or, worse, a fraudster!

Fraud, grift… doesn’t really matter what you call it. The lines, at this point, are blurred.

▶Speaking of IPOs, not-so-sudden thought: With the surge in mega IPOs while "the window is open," my mind harkens back to the oldest saying of all on Wall Street, which is as true now as it ever was: When the ducks are quacking, feed the ducks!

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▶Meanwhile, for those keeping up with the Saga of Erie (Indemnity, that is)… the latest: On Thursday, CFO Julie Pelkowski will retire at year-end. She’s 56, which ironically is the same percentage decline of Erie’s stock since I first red-flagged it a few years ago. Her departure follows February’s announcement that CEO Tim NeCastro, 65, will leave… also at year-end. In between their departures, Chairman Tom Hagen departed. He’s the son of the company’s founder… and Hagen will be replaced by his son. Regardless, it’s a clean sweep… and it comes as competition only intensifies, with reported pricing per policy by the likes of Progressive continuing to get more aggressive.

▶Finally, I first informally red-flagged Hoka/Uggs-maker Decker’s in June 2024, noting a subtle yet significant change in a single word in the company’s 10-Q, following up in February 2025 with a single added word. Since then, revenue growth has sharply decelerated…

As has the stock price…

Yet, while there is no denying that Decker’s did an exceptional job seizing the moment, culminating with the post-pandemic surge, management and analysts continue to promote a story that has decoupled from reality. Such as…

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▶Every day is a new day of not just another WTF, but… It’s all happening before our eyes.

Talk about red flag alerts!

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This one, just as the monumental SpaceX IPO hits, takes the cake. Proposed as “the foundation” of SEC Chair Paul Atkins’s “agenda to Make IPOs Great Again,” this kowtowing to Wall Street – especially investment bankers, the Nasdaq, and the NYSE – strips away the very rules and regs designed to make it harder to deceive investors. My friend Michelle Leder, who writes the venerable footnoted.com, summarized it here on LinkedIn…

That prompted accounting teacher/writer Francine McKenna, who writes The Dig on Substack, to comment…

In other words, a layer of rules and regs designed to help avoid another Enron is being stripped away for 81% of all public companies. Eighty-one percent! Let that sink in…

The obvious reason this is being done is to make it less costly for companies to go and stay public, since fewer companies are. In addition to bankers and the exchanges, other winners would include corporate lawyers and VC firms, since this would give them an easier exit from private holdings via IPOs.

Heck, in a perverse way, it may very well be good news for anybody who flies red flags!

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This, of course, comes on the heels of another current proposal to eliminate the requirement for quarterly financial disclosures.

I’ll let you all debate this among yourselves, but needless to say, less disclosure is never better.

And while all of this may help make IPOs great again, it will make fraud great again, too.

As always, interpret at will.

Agree? Disagree? Feel free to comment below.

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DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!) I have no investment of any kind in any company mentioned in this report.

I can be reached at herb@herbgreenberg.com.

▶“It’s wild, who wins and loses each day.”

That was a friend commenting on something I texted him regarding drone maker AeroVironment , one of my long-ago red-flagged names that can’t get out of its own way. Not that it’s the only drone-maker that can’t, but in the early days of Ukraine, it was the only drone-maker that could, as the pure-play on military drones... with an amazingly hot stock to match. Now, even with Iran, AeroVironment’s stock couldn’t be weaker, while the drone narrative couldn’t be stronger. Or as CEO Wahid Nawabi puts it, “This is like our moment, if you ask me.”

But as I pointed out in my mini-case study on AeroVironment, after its most recent clash with gravity, with the stock half its highs, sometimes it’s about more than being in the right place at the right time. And after years of being run by promotional management, the market doesn’t really care what Nawabi & Co. say or promise. The proof, as my technical analyst friends would likely say, is that AeroVironment is a weak stock in an otherwise hot group.

But back to my friend… In all likelihood, when he saw my text, I’m assuming he was glancing over at a screen full of the dozens of stocks he’s long and short… while at the same time trying not to overthink the day’s action, which stopped making sense long ago.

Still, in what we’re told is an exceedingly efficient market, there are pockets of inefficiencies – long and short… prediction markets, pod shops, and passive investing, notwithstanding.

From a red flags perspective, these are the stocks everybody isn’t talking about, that aren’t in the headlines… and are generally viewed as set-it-and-forget-it by investors because, beyond being viewed as too boring in an exciting market like this, they’ve always worked.

Like SiteOne , which I red-flagged last June. It went on to rise 35%, which was nonsensical. It’s now down 1%. Or Ingersoll-Rand , which at one point was up 29% since after my red-flagging in December, it’s now down around 9%. Or Clorox , initially up 16% after my red flag; now down 23%.

Of course, there are others, which I like to call the “we’ll show him” stocks – notably AXT , which is roughly double where it was when I red-flagged it a mere five weeks ago… and is up nearly 600% since January. And 7,500% over the past year. Then again, half the gain since my first salvo coincided with the launch of the leveraged Tradr 2X Long AXTI Daily ETF Investment Managers Series Trust II , which is a shadow stock only gamblers could love. Or as I explained when I first mentioned it, “It confirms just how detached AXT’s stock is from reality – making it perfect for the casino.”

Last I looked, the betting window was still open, which brings us to the moral of today’s story, courtesy of my pal: the notable and always quotable Bob Howard of the Positive Patterns newsletter from “down in the Ozarks.” After decades of stock picking, if he’s learned nothing else – year in, year out, cycle in, cycle out – it’s this…

The market doesn’t care what you believed last month.

New data comes in. Most people ignore it – because changing your mind feels like losing. So they hold. They cope. They call it conviction.

It’s not. It’s ego.

The best investors I’ve studied weren’t always right. They were just fast to admit when they were wrong.

That’s the edge. Not intelligence. Flexibility.

Common sense in an uncommon time.

P.S.: It’s more nuanced than that, of course. And truth be told, when it comes to mixing ego and investing: Guilty as charged!

▶Unrelated: A personal trainer I know says this is the slowest he has seen it this time of year in 30 years.

▶Meanwhile, from the “Golden Age of Grift” dept., via my friend Ed Borgato: Who needs the predictions markets when you have ETFs that benefit from predicting the outcome of elections? Some brokers are saying… enough!…

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▶From the most recent crop of earnings, quick updates on Shake Shack , Super Group , and G-III Apparel . Plus, three companies whose evasion on their latest earnings calls was so off-the-baseline that they warranted warnings from my pals at Paragon Intel’s ManagementTrack, which has proven to be a not-to-be-ignored predictor of underperformance.

▶Shaken to the core: Since red-flagging Shake Shack in January, its stock has tumbled by roughly 35%….

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I’m changing my mind, starting with a few ICYMIs…

▶If you missed my latest Red Flag Alert on Modine Manufacturing , you can read it here…

▶Also during the week, this one was my absolute favorite – my take on how GFL Environmental is, in broad daylight for everybody to see, saying out loud how it’s gaming the market. It’s quite a story, if I don’t say so myself. You can read it here…

▶Also, in what was likely an otherwise busy week of earnings for many of you, it’s quite possible you missed my take on the surprise that really shouldn’t have been, but based on the stock of UPS , was: Amazon’s formal entry as a serious UPS competitor. You can read it here…

▶Speaking of which… Is UPS Next?

Just sayin’, especially since, under a new CFO, the company’s tone and commentary around the dividend has subtly changed. After 16 consecutive years of raising the dividend, CFO Brian Dykes told investors in March…

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I don’t take this one lightly, because its stock has been a rocket, rising 1,000% over three years.

On the other hand… that’s what snared me into taking a look at 110-year-old Modine Manufacturing, which got its start making radiators for tractors. And not just any radiator, but the Spirex radiator, which helped solve the problem of engines overheating under heavy workloads.

While the Spirex radiator is long gone, Modine went on to become a major factor in thermal management systems in vehicles, which then, in a small way, morphed into data centers pre-pandemic… but more conventional IT infrastructure-related data centers rather than anything having to do with AI.

Which gets us to where we are now and why Modine is ripe for a red flag.

The Bullish Spin

Before I explain why, let’s go to the AI-generated bull case courtesy of my pals at Tenzing MEMO, which was used in researching – not writing! – this report…

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In my original May 2024 report, the hook was how the company, a rollup, was simply too complicated for comfort…

It became a story with such a bad stench – including gunshots fired at the houses of CEO Patrick Dovigi and another executive – that it became the personification of dysfunction junction, as I wrote below…

But none of that mattered, with the stock leaping by roughy 55%, at its peak, nearly a year to the day after I first red-flagged it…

Well, here we are two years and two days from my opening salvo and… I cannot NOT touch this wet paint.

Seems I missed something significant, and I’m not talking about the recent rounds of gunfire and arson at a few of the company’s Canadian facilities… not to be confused with the gunshots at Dovigi’s house. (Nothing to see here, folks, move along…)

Or even GFL’s recent $4.8 billion bid to acquire Canadian rival Secure Waste Infrastructure, which has not gone over well with Wall Street. (I’ll have a comment about that in a moment)

It’s All About the Stock

What really grabbed my attention was something considerably more subtle, but nonetheless exceedingly significant, which speaks to just how insanely blatantly (or desperately) GFL is pandering to Wall Street and, more broadly, just how gamed this market has become.

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If you missed it, the company announced that it has officially launched Amazon Supply Chain Services, which opens its logistics network to all businesses. This includes ground shipping and freight services. While nobody was looking, Amazon built a fleet of more than 100 aircraft, 80,000 trailers, and 24,000 intermodal containers.

In other words, it’s big… big enough to be more than just a bit player.

Here’s what I wrote last August in my red flag report on UPS…

“At the same time, Amazon continues to build its own freight fleet as it now ships more than two-thirds of its own packages as well as packages for its third-party sellers, with the constant risk that Amazon will open up its freight business to a bigger base of potential customers.”

You can read the full report here…

Just think about all of those Amazon trucks ALREADY on your street… and how the company disrupted retail... and more to the point: How it used its excess server capacity to become a major supplier of cloud services to corporations.

The crazy part, especially with the stock’s tumbling today – down more than 8% as I write this: It’s almost as if investors chose to ignore what was happening in broad daylight – and as if Amazon wasn’t sending a BIG signal when it pulled most of its business away from UPS over the past year. Instead, as the chart below shows, with the stock’s earlier surge, they chose to go with UPS’s spin of a “glide down” in terms of the impact of UPS’s exit.

But as I’ve quoted UPS critic Donald Broughton of transportation-focused Broughton Capital numerous times, saying that UPS’s structure is fundamentally flawed.

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▶And if you missed my chat with of CapitAI on his new index and methodology for tracking which companies are REALLY committed to using AI, you can see it here…

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▶Speaking of all things AI, and how nobody knows nothin’: The latest in the AI bubble tug-of-war is over whether there really is a scarcity of GPUs. Those are the chips that drive AI by powering data centers. That, of course, ultimately gets to the question of whether we’re at the data centers gone wild phase of this cycle. On one hand, you have a Twitter post like this one, which made the chatter rounds…

But then there was this one, buried in this thread, which also drew sharp debate…

None of this takes into account what happens when enterprise use by corporations really kicks in… whenever that might be. So, I went to the source: Gemini and Claude, and asked which side is right, and then how the evolution of use by enterprise fits in, which is something neither side addressed.

After long-winded answers by both, they both gave answers that – reading between the lines – were a concession that they’re as clueless as everybody else. Ditto when I asked the enterprise question. Gemini kicked that question back to me, but not before saying…

And Claude concluded…

Interpret at will…

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▶Speaking of whether it is or is not an AI bubble: For a realistic view, check out this presentation at The Money Show from my pal, the tech analyst, Paul Meeks. The thing about Paul is... he's a realist, not a razzle-dazleist. And he has been through the cycles, which is why I put more weight on his approach to this question than most.

▶Finally, before we go behind the paywall… If you missed it, this interview by Patrick O’Shaughnessy of legendary investor Paul Tudor Jones has been making the rounds. And for good reason, since it’s loaded with insights into the markets and… life. The part the grabbed me most: what he said about retirement. Here, he’s talking about what happened when he and his wife moved to Palm Beach once his kids were out of the house…

So we ended up down here in Palm Beach. She gets me to see a GP, the GP, a general practitioner. She makes me go in, I see the guy.

This guy’s 83 years old. And I say to him, you’re living here in the land of the walking dead. Everyone here is basically fossilized.

What is the secret to longevity? And he goes, it’s real simple. You retire, you die.”

That one line defines why I haven't and won't. (Retire, that is.) So, please stop asking.

▶Oh, and this update: I had mentioned I was fast-tracking a new red-flag alert. After doing more work, I realized I needed to put it back on the slow track. Should be any day.

▶And… there will be in all likelihood be no Wrap next week. As always, I reserve the right to change my mind.

For Premium Subs – Quick Comments on Roku, Omnicom, ResMed, AXT

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That’s when co-host Brad Gerstner asked Sam Altman…

How can a company with $13 billion in revenues make $1.4 trillion of spend commitments? You’ve heard the criticism, Sam.

Altman tensed up and shot back tersely and tensely…

If you want to sell your shares, I’ll find you a buyer. Enough.

You almost had to see it and hear it to fully appreciate the tension of the moment.

As time has gone on, it has become increasingly apparent why he was more intense than usual, with this story in the Wall Street Journal saying the quiet part out loud…

More specifically….

OpenAI recently missed its own targets for new users and revenue, stumbles that have raised concern among some company leaders about whether it will be able to support its massive spending on data centers.

Chief Financial Officer Sarah Friar has told other company leaders that she is worried the company might not be able to pay for future computing contracts if revenue doesn’t grow fast enough, according to people familiar with the matter.

Not surprisingly, OpenAI this morning told CNBC the report “is ridiculous,” adding…

We are totally aligned on buying as much compute as we can and working hard on it together every day.

But the real story isn’t what the Journal wrote or what OpenAI is saying, but what OpenAI’s customers are not just saying, but doing.

And based on the surveys from my friends at the market research firm ETR, which specializes in surveying corporate IT spenders, OpenAI is rapidly losing the momentum that comes with first-mover advantage.

Most telling, in going through the actual survey results, is the number of users that have decreased spend who say they are shifting to Anthropic.

You can see the trend clearly in this slide…

And this one….

But this one is most telling, because it shows just how much Anthropic is overtaking OpenAI not just in mind share, but spending…

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I took a few minutes to catch up with today at my old haunt, CNBC, to talk about – what else?! - the dysfunction junction of some of these stocks…

And if you missed this one from earlier…

My best advice: Don’t try to over-intellectualize it. It is what it is… yada yada!

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DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!) I have no investment of any kind in any company mentioned in this report.

I can be reached at herb@herbgreenberg.com.

As promised, here’s a replay of my fun conversation with Al Lewis of Business Blunders about grift, fraud, and what causes the current outta control nature of all of this nonsense to stop.

Watch this space for more convos like this from time to time… especially with folks who tend not to be on the podcast recycle circuit. (And maybe a few who are.)

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And speaking of grift, I simply can’t keep up with the WTF? moments of the level of hiding in plain sight shenanigans that are going on. Here’s a taste, from earlier this morning…

The beat goes on…

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DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!) I have no investment of any kind in any company mentioned in this report.

I can be reached at herb@herbgreenberg.com.

ESAB may not be a headline name. But as a spinout from a company created by the Rales Brothers, perhaps best known as the founders of Danaher , ESAB has as good a DNA as any. My focus, as increasingly seems to be the case lately, is on a false narrative being spewed by management… in this case, that ESAB is a “premier industrial compounder.” Spoiler alert: It’s not.

Not that it matters… at least not right now. Like every other stock that wasn’t nailed down yesterday, ESAB spiked 10%, prompting one premium subscriber to say…

Seems like there are easier shorts. This company is over 100 yrs old and is in a good business with recurring revenue. The multiple is much cheaper than LECO, the other US welding champ. I wouldn’t want to be short this in front of US reindustrialization & a mammoth Middle East reconstruction effort. ESAB has mfg facilities in Saudi Arabia and is positioned to benefit.

To which…

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▶In keeping with a theme I’ve been hooked on lately… false narratives: Some companies really are compounders. It’s the ones that claim they are, but aren’t, that you should be concerned about.

And not just any old compounder, but a “premier…compounder.”

Welcome to the over-the-top promotional world of ESAB Corp. , a rollup of welding equipment that was spun off a few years ago from Colfax Corp., which at the time of the ESAB spin rebranded itself as Enovis .

Special thanks to Tenzing MEMO, Fiscal.ai, and Behind the Numbers, which were used as part of this research.

What makes ESAB seemingly so special is its DNA, in that Colfax was founded by the legendary Rales Brothers, Mitchell and Steven. They also founded Danaher … viewed by many as the gold standard for modern industrial compounders.

More than that, unlike Enovis, Mitchell stayed on as chairman of ESAB. He also owns a stake of more than 5% of its shares. Adding to their enthusiasm, both brothers helped fund the company’s recently announced $1.45 billion acquisition of Eddyfi Technologies, a leader in non-destructive testing, with the purchase of $125 million in convertible preferred shares.

With That As the Backdrop…

It’s no wonder investors have bought into ESAB’s “compounder” story…

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Be on the lookout for a new Red Flag Alert in the coming days. This company, with a market value above $5 billion and roughly $40 million in average daily volume, sticks with an ongoing theme here of real companies with real products and real revenue that are faking it in the hope of making it… at least in terms of becoming what they already claim to be. Stay tuned.

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▶Also, if you missed my Zoom with Turning Point Brands bull George Baxter, you can hear the replay here…

I also include an updated 39-page slide presentation. The slides include a breakdown of the short-term risk associated with the company’s announcement yesterday of a deal with TKO Group TKO 0.32%↑, and, more broadly… what could go wrong with his thesis.

Quick aside, for those interested in AI editing: This was the first time I’ve run a Zoom call through an AI program to get rid of the fluff and even improve the video presentation. I used Descript. What I found was that for this specific use, agentic editing of audio and especially video is very hard to get right. That’s why, in the end, I opted for an unedited audio version.

▶Also, the bull/bear slugfest on AXT Inc. has shifted into high gear. I first wrote about the company less than two weeks ago. Since then, if nothing else, the swings in its stock show how little conviction there is, with its shares sinking as much as 34% after the report… to back to even, and then some in recent days. All of this, mind you, on no real news other than: The market’s continued infatuation with all things optics; the persistent “story” that AXT is in the catbird seat to help break the “bottleneck” for indium phosphide substrates, which are needed for advanced fiber optic connectors and are purportedly are in short supply; and the filing of the company’s latest proxy, which included a proposal for AXT to increase its outstanding shares, in turn used to raise more cash to expand capacity. Never mind the potential dilution or the reality that it’s not the only supplier out there rushing to build capacity.

I go through a few of the market realities and risks to the bearish thesis in my report, which you can read here…

Regardless, AXT is a perfect story in a market that thrives on stories.

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▶Also worth noting, next time a CEO starts ranting about short-sellers: Did you notice that the peak in Palantir was the day of the seemingly good earnings report on November 3.

It was the next morning that CEO Alex Karp went on CNBC, ranting about the shorts. He did the same thing in a letter to shareholders, where he wrote…

As I pointed out at the time…

When I see a CEO not only go off on the shorts, and I see a guy whose stock is up nearly 200% this year using words like “deranged” and “self-destructive befuddlement” to describe his company’s “detractors,” I’m thinking… why?

And then to talk about how his company has helped “retail investors…achieve the kinds of rates of return previously limited to the most successful venture capitalists,” I’m thinking… why?

Maybe he saw what was coming. Just as Sam Altman of OpenAI did when he had his podcast meltdown roughly the same time.

▶Finally, the main event – pathetic stock promotion…

I guess there is no way around those penny stock commercials that pop up on financial TV, especially in the early hours here in California. You’ve seen them, and I’ve written about them before…

They’re always variations on the same theme, with a reminder by the announcer of what the “ticker” is and which exchange it trades on, as if that’s important.

One of my favorites, which I wrote about early last year, was Venu Holding , which operates concert venues… and in its commercial claimed to trade on “The New York Stock Exchange.” As I pointed out at the time, the stock wasn’t really trading on the real NYSE but the NYSE American, which is for the nanocaps that can barely meet listing requirements but can afford to pay listing fees. As it turns out, within five months, the stock doubled, but now trades at half where it was when I wrote about it.

But at least Venu generates revenue!

That’s more than I can say for the piece of garbage (my opinion!) that was promoted on a commercial this past week. The company: Greenland Mines. The first words in the first second of the 30-second spot from the announcer were, “The world needs palladium”…

To which I’m thinking: “Oh, puhleeze.”

As if on cue, within seconds, the announcer mentions, “the ticker – GRML,” and later says it again, adding, “On the Nasdaq.”

Never mind that the Nasdaq he’s referring to is really the Nasdaq Capital Markets, better known as the NasdaqCM. That’s not to be confused with the real Nasdaq; the CM is the entry-level Nasdaq, akin to the long-gone (may it not RIP) Vancouver Stock Exchange, where, like the NYSE American, almost anybody anywhere could list as long as they could pay the fees and meet the listing and disclosure requirements.

When I heard “palladium” and saw Greenland, despite having considerably better things to do, I couldn’t not take a peek. After all, given all the publicity surrounding the country, especially about supposedly “rare” minerals, it’s a stock promoter’s dream come true.

And Greenland Mines, in my view, checks every box. Among the fun finds…

• Until a month ago, Greenland Mines was known as Klotho Neurosciences, a 2024 SPAC creation that claims to have five market-approved anti-cancer drugs approved for sale in Germany. Its original name, when it was merged into the SPAC, was Anew Medical. It changed its name to Klotho a few months later.

• It has no revenue, or as the company said in its 10-K, “We have not generated any revenue to date.”

• As of the 10-K, it has two full-time employees.

• It has been battling Nasdaq not to be delisted.

• It acquired mining assets that have – how shall we say, based on my own research – a sketchy history.

• The company now has two divisions: mining and cell and gene therapy.

That last point on its own, but especially against the backdrop of the others, puts it into the bucket I like to call, “If you knew nothing else…”

As of Friday, with the company’s market cap just tipping $40 million – coincidentally, the daily volume of the company I’m about to red flag – the stock traded for 40 cents a share, up around 33% for the week. TV commercials will do that.

As I said, the stench, to my nose, is unmistakable, and I’m being kind: Garbage.

Interpret at will.

As always, feel free to hit the heart button or leave a comment… or even share with your friends. And if you haven’t already, become a premium subscriber.

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DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!) I own shares in Turning Point.

I can be reached at herb@herbgreenberg.com.

If you’re not currently a premium subscriber and wondering what you missed, here’s a snippet of George explaining why he believes the company’s guidance for pouch sales this quarter is too low – in part because of a newly introduced product.

And the impact on sales with heightened friction between Tucker Carlson (who has a business relationship with the company, and acts as a spokesperson) and President Trump…

And a comment on his new short idea…

Now, for the full audio version of the call and George’s updated 39-page slide presentation. The slides include a breakdown of the short-term risk associated with the company’s announcement yesterday of a deal with TKO Group , and, more broadly… what could go wrong with his thesis.

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The last quarter and guidance continued to disappoint. While neither the struggling housing market nor tariffs helped, the reality is that the company appears to be struggling to the point of reaching. The proof is this comment from CEO Gary Friedman on the company’s most recent earnings call, when he said…

We’ve designed, I think, some of the most exciting retail concepts coming – it’s like new versions of RH that I think are mind-blowing, and they cost half as much. And we have other ones that are equally creative that will probably take less than half the time and cost less.

For quarters, these concepts have included “design compounds” and “design ecosystems” – all in the name of extending and expanding the brand faster.

But wait, you haven’t seen anything yet: In the most recent quarter, the focus turned to yet another new concept, RH Estates, which Friedman says “will become our largest and highest margin brand extension driving significant growth over the next several years.”

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Running On Empty?

To my pal Rob Wilson of Tiburon Research, who also writes the Consumer EQ newsletter and probably knows more about RH since he once worked there as treasurer, the rollout of all these concepts “is a jump the shark moment.”

Or as he told me…

I think it says clearly that they’ve run out of opportunities to build these large stores with restaurants in the U.S. So, they need something to show that there’s still an opportunity for growth, and this is what they came up with. But, just last quarter, they were touting their “design studios” following the opening of the first one in Palm Desert. This was a 3,000-square-foot store that used to be a Lululemon store. Now they’re pivoting to focus on the ‘ecosystem’ stuff and they’ve not even opened one up… yet, are touting its potential.

He adds…

Beware any retailer touting something they’ve not yet tested. The rate of failure is high in those situations, in my experience.

Rob, whose client base is institutional – but also writes Consumer EQ – intends to elaborate on this in an upcoming report. (If you’re interested in retail investing, he should definitely be in your mix.)

Dream a Little Dream…

The thing is, it’s not as if he doesn’t admire what Friedman has built. “I want to be clear, what he’s done over the past 26 years is spectacular. I just question how big the business will become and how profitable it will be.“

And that’s the point: As I wrote in my original Red Flag Radar on RH, Friedman is an extraordinary marketer. He doesn’t know how to just sell the dream to consumers, but to investors as well.

Look no further than the latest narrative: Citing an estimated $30 trillion to $38 trillion “wealth transfer projected to take place over the next 10 years, which is more than double the past 10 years,” Friedman says…

Not only does the absolute dollar amount more than double, it's estimated that the dollars transfer from one to an average of seven people. It's possible over the next 10 years, our market will be multiple times larger than the past 10 years. When you combine that with our efforts to elevate and expand our product, globally expand our platform, generate significant revenues and brand awareness with our immersive hospitality venues, I would argue that the RH brand is in the perfect place, at the perfect time, and we will emerge from this period of clutter, discord and difficulty, as one of the highest-performing and most admired brands in the world.

To which Rob says…

When you put out pie-in-the-sky numbers for three to four years from now with very little detail about how the numbers may or may not look from here to there… and then, you come up with a thesis that says macro factors are the major driver (e.g., ultra high net worth individuals spend more on their homes and there’s a massive wealth transfer coming)… then, you’re done.

But it also keeps the dream alive…

Or as I originally quoted Rob as saying when the stock was flying, it feeds into the “irrational extrapolation” by analysts and investors who buy into Friedman’s thesis.

The difference between then and now is that reality is winning over irrational extrapolation. But as was the case then, RH remains a game of chicken… with the shorts likely to continue claiming their own victories along the way.

At least, that’s how it has been so far, with the stock rising nearly 40% in the months following my original RH Red Flag Radar, before… crashing, crashing, and crashing some more…

In the meantime, the dream lives on.

▶If you missed my report on AXT Inc. , you can read it here…

Since then, the stock has been whipped around in what will surely go down as one of the wildest weeks for the market…

The stock took a major hit on Thursday on reports that Lumentum was including indium phosphide substrates – AXT’s specialty – as part of a major expansion at a plant in North Carolina. I could not find any evidence of that, so I asked Lumentum’s IR, which responded…

I can confirm that we did not message any InP substrate manufacturing as a part of our manufacturing expansion in Greensboro. We did mention that this will be a 6”-capable fab for InP laser chip manufacturing, but our baseline plans for this site do not include the ingot-pulling, substrate manufacturing part of the process.

That, of course, doesn’t change the thesis of my report. Ultimately, as I wrote, AXT is a tale as old as the law of supply and demand. Doesn’t matter whether it’s high‑end optical networking gear during the dot-com boom, fracking sand during the fracking boom, or even pasture-raised eggs. Indium phosphide wafers will be no different.

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The single biggest mistake investors make is looking at reward before risk. The smartest investors do just the opposite…

Looking for reasons to avoid buying a stock, or what the risks are if you do, has been the hallmark of Herb on the Street for decades and, in more recent years, my Red Flag Alerts of Stocks to Avoid.

Even in a market that seems to do nothing but go up, it’s still a market of stocks… and some can and DO go down, even as the market surges higher.

You can see that here, in my entire list of formally red-flagged stocks since inception, as of early April, 2026…

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Whichever camp you might fall in, the concept is simple: with thousands of publicly traded stocks, why pick these?

Even if I don’t write about your stock: in a market where the notions that “you only live once” and “hold on for dear life” have eclipsed the concepts of fundamental investing, hopefully my Red Flag Alerts will help serve as a reminder of the risks, as it did for this subscriber, who wrote…

And this one…

And this one…

And for what it’s worth: I also fly green flags every and then. But when I do, I practice what I preach – always thinking to myself: What could go wrong?

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AXT is one of those companies that has attracted whatever is left of the YOLO crowd, even if the substance doesn’t match the story. It reminds me in every way of so many other companies that had their moment in the stock market sun, swept up by real or perceived potential new business from the narrative du jour.

That narrative today is that, as the construction of AI‑centric data centers has boomed, so has the demand for advanced fiber optic connectors, which rely on indium phosphide lasers to deliver the required speed.

Guess who makes critical indium phosphide substrate wafers used to make the lasers?

You got it – AXT.

It’s quite a story… and I stress… story. Perhaps no company exemplifies the silly late-stage nature of this phase of the AI gold rush more than AXT, which appears to be little more than a microcap MOMO trade gone wild… more of a throwback to the latest round of AI FOMO.

This is, after all, a stock that as recently as last spring traded just above $1, with a market value of $60 million before taking off. It’s now $60 with a market cap of $3.3 billion.

But beyond its market value and stock price, AXT still has all the hallmarks of the microcap it really is… and not just because its board of directors is comprised of three outsiders and the CEO.

And it has the financial performance to match, with muddling revenue growth and margins…

And even after being in business for 40 years, its ability to make money has at best been spotty…

To the bulls, of course, that’s looking backwards.

Bull Case

For them, it’s what’s coming next for a company they believe is in the right place with the right product at the right time. Here’s an AI-generated summary of what has been driving the stock… courtesy of my friends at Tenzing MEMO…

AXTI is a levered way to invest in one of the least-appreciated choke points in AI infrastructure: indium phosphide (InP) substrate wafers, a critical input for the lasers and detectors used in high-speed optical links inside and between AI data centers. As compute scales, optical connectivity becomes more important, and AXTI sits upstream in a technically difficult market with only a few qualified suppliers.

The near-term numbers look messy, but the bull case is that 2025 was distorted by export permit delays and temporary manufacturing issues, not by weak demand. Management has described backlog above $60 million, expects sequential growth in Q1 2026, and is seeing especially strong InP demand tied to AI buildouts. If permits continue to improve, delayed orders can quickly convert into revenue.

There is also significant operating leverage here. AXTI’s margin collapse came from low utilization and bad product mix; if InP shipments normalize and capacity fills, gross margin can recover sharply. Meanwhile, the December 2025 equity raise added about $100 million gross, leaving the company with roughly $120 million of cash at year-end and a net cash position, which gives it time to expand capacity.

In short: scarce product, real AI demand, limited competition, improving liquidity, and potentially explosive earnings recovery if regulatory friction eases.

Based on my research, that’s the story, at least, and that’s why there is no shortage of social media chatter on AXT, as seen here via Stocktwits…

But as is often the case with stocks like these, there’s the story, and there’s reality… and reality is that while AXT is a potential winner in the booming demand for indium phosphide substrates, the story ain’t all the stock suggests it’s cracked up to be.

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