Short Alphatec (Nasdaq: ATEC) – Bonitas Research
Bonitas Research exposes Alphatec Holdings (ATEC) alleged revenue inflation scheme, undisclosed FDA recalls, suspicious related-party distributors, insider selling, and financial irregularities threatening investor confidence.
Bonitas Research reveals how Alphatec Holdings allegedly uses covert related-party distributors run by insiders to artificially inflate revenue figures while hiding FDA product recalls, masking cash flow discrepancies, and exhibiting troubling insider selling patterns.
Stock info:
- Ticker: ATEC (NASDAQ)
- Position: Bonitas Research is short ATEC
Why it matters:
- Bonitas alleges ATEC orchestrated a scheme using at least four undisclosed related-party distributors secretly established by ATEC employees and shareholders to inflate revenue and inventory figures
- A calculated $31 million discrepancy exists between reported inventory changes and actual cash outflows, suggesting artificial revenue inflation
- ATEC failed to disclose a significant FDA Class II product recall in April 2021 involving 29 products with potentially serious patient risks
- Multiple red flags include: 355 adverse event reports for device failures, three auditor changes, CFO resignation with $6 million in forfeited stock, and CMO selling 99.9% of his shares
- Unsustainable business model evidenced by SG&A expenses consuming 94-98% of revenue (2021-2022) and continuous operating losses despite reported revenue growth
Catch up quick:
- Court filings reveal former NuVasive distributors experienced dramatic sales declines after switching to ATEC products, contradicting ATEC's claimed 65% revenue growth since 2017
- ATEC pays "top of industry" and "bounty" commissions to distributors, suggesting desperate measures to drive sales
- Specific related-party distributors identified include Empire Surgical (Eric Sokolowski), The Core Group (Peter Popjevalo), J&B Device Equipment LLC (James Greene/William Vanlandingham), and Advanced Surgical Resources of Ohio LLC (Greg Rhinehart)
- ATEC's $177 million net debt position and continuous operational losses raise serious questions about financial viability despite $700 million market cap
- Timing of auditor changes (from Ernst & Young to Mayer Hoffman McCann to Deloitte) coincides with alleged financial irregularities and FDA product recalls
FAQs:
What are the main allegations in the Bonitas Research report on Alphatec Holdings?
The report alleges ATEC created undisclosed related-party distributors run by insiders to artificially inflate revenue and inventory figures, failed to disclose FDA product recalls, manipulated financial statements, and exhibited concerning insider selling patterns.
What evidence does Bonitas provide for related-party distributor allegations?
Bonitas cites corporate registry filings, LinkedIn profiles, and other documents linking ATEC employees and shareholders to supposedly "independent" distributors like Empire Surgical, The Core Group, J&B Device Equipment, and Advanced Surgical Resources of Ohio.
What product safety issues does the report highlight?
The report reveals an undisclosed FDA Class II recall in April 2021 involving 29 products (Insignia Anterior Cervical Plate System) with potential screw blocking mechanism failures, plus 355 adverse event reports documenting device detachment, dislocation, and breakage.
Why does Bonitas believe ATEC's revenue growth is unsustainable?
ATEC reports 65% revenue growth since 2017, far exceeding industry peers, while maintaining unsustainable SG&A expenses (94-98% of revenue), paying above-market commissions, and experiencing declining sales through distributors according to court testimony.
What financial discrepancies does the report identify?
Bonitas calculates a $31 million discrepancy between reported inventory changes and actual cash outflows, suggesting artificial revenue inflation. The report also highlights questionable accounting practices related to obsolete inventory treatment.
What insider selling activity raises concerns?
Chief Medical Officer Luiz Pimenta sold 99.9% of his ATEC shares (from 587,301 to just 100), and CFO Jeffrey Black resigned after forfeiting $6 million in unvested stock, suggesting lack of confidence in the company's future.
How does ATEC's corporate governance appear problematic?
ATEC has changed auditors three times since 2017 (Ernst & Young to Mayer Hoffman McCann to Deloitte) and experienced CFO turnover, with timing that coincides with alleged financial irregularities and undisclosed FDA product recalls.
Disclaimer
This summary is based on a report by Bonitas Research. For the full, detailed analysis, please refer to the original source material: https://www.bonitasresearch.com/company/short-alphatec-nasdaq-atec/
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