Many tech stocks are back to rising today after weeks of struggling amid unstable market conditions. However, these companies still have a lot of ground to make up after spending the month trending downward.
Despite this recent shift in direction for some top companies, much remains uncertain as recession fears loom large over entire industries. While some investors view this as an opportunity to acquire stocks on the dip, others are cautiously approaching.
This complicated period may be seen as an opportunity to identify the next generation of high-growth tech stocks that will surge when market conditions improve. However, Iceberg Research recently published a short report highlighting a company that has made waves in the artificial intelligence (AI) market.
The report provides a detailed analysis of the case against this decision intelligence company, alleging highly questionable activity that could put investors on the defensive.
CEO Alex Karp has helped Palantir Technologies ride out this difficult time but other AI companies may not be so lucky.
The next Palantir? Not according to this short seller
Iceberg Research is known for exposing tech companies that have misled investors, specifically with regard to financial manipulation and fraudulent accounting practices. In a report published on March 11, they dug into a trendy AI stock, but not for the first time.
BigBear.ai Holdings (BBAI) has benefitted from the AI boom, much like many companies with AI in their titles. A decision intelligence company that claims to cater to clients in industries such as defense technology, manufacturing and warehouse operations, leading some to compare it to Palantir Technologies (PLTR) .
Related: Prominent investor highlights recent AI progress from Palantir
However, as the short report shows, these claims may be highly questionable. According to Iceberg’s research, BigBear has posted misleading announcements regarding lucrative contracts that have boosted share prices and omitted key details from others. Per the report:
“On 20 August 2024 after trading hours, BigBear announced a “10 year $2.4 billion shared contract with the US Federal Aviation Administration”. The stock surged over 40% the very next day.
The since deleted headline misleadingly suggested that Concept Solutions partnered with BigBear to win the tender. In reality, the FAA awarded the contract to 14 prime contractors, including Concept Solutions, that in turn has 12 subcontractors, BigBear being one of them.”
That’s just the tip of the iceberg. The short report lists several other examples of similar instances, stating that they were “designed to create short-term market excitement rather than reflect significant wins” and noting the sharp price increase they sparked for BBAI stock each time.
While BigBear may have provided misleading information on multiple defense contracts, Iceberg Research also sees complications ahead for the contracts it does have. The short seller also notes that the so-called Department of Government Efficiency (DOGE) is focused on reducing federal spending, which could negatively impact companies that depend on military contracts.
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The short report makes it clear that the characterization of BigBear.ai as “the next Palantir” may be both premature and inappropriate, as the penny stock is facing a highly uncertain future and may have misled investors.
Institutional investors have fled, leaving retail holding the bag
The misleading announcement accusations aren’t the only concern of Iceberg Research’s case against BigBear. Its authors also highlight that the stock surges prompted by these questionable headlines provided lucrative opportunities for the company’s top institutional investor to trim its position.
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BigBear’s top shareholder is AE Industrial Partners, a private equity firm that invests in aerospace companies. In an update published December 16, 2024, Iceberg revealed that the controlling shareholder had been reducing its BBAI holdings, leaving retail investors holding the bag as shares inevitably fell.
At the time, Iceberg emphasized that BigBear should not be seen as an effective way to play the AI market but as “a vehicle for private equity to drop underperforming legacy assets onto retail investors,” noting that weakening AI hype would likely push shares down.
Months later, this perspective remains unchanged, as Iceberg maintains its short position in BBAI. “With no clear path to profitability and an over-reliance on a government now focused on cost-cutting, it’s no surprise that AEIP dumped shares right before earnings,” the report notes.
BigBear did not return TheStreet’s request for comment.
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