Symbotic – The Plot Gets Even Thicker

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The latest twist in our continuing saga about Symbotic $SYM…

In yesterday’s Wall Street Journal, there’s a story headlined, “The Little-Known Company Holding the Key to a $20 Billion Grocery Deal.”

From that story you wouldn’t know that there’s a fairly significant subplot that ties back to Symbotic, which isn’t mentioned but has been lurking there all along.

Quick Refresher

I first started writing about Symbotic in my Red Flag Alerts in May. The piece was headlined, “Hiding in the Open.”

I followed up a few days ago with a second piece focusing on earnings, thanks to my friends at Behind the Numbers.

Earlier that same day, coincidentally, an anonymous short-seller wrote a colossal 80-page short report that is so detailed it’ll make your head hurt trying to untangle it. I obviously have no idea if its allegations are true, but the report appears to be so painstakingly thorough that it’s hard to ignore… especially given my history of writing about the company.

If you’re new to the story: Symbotic makes warehouse automation systems. With its roots as a Softbank-sponsored SPAC, the company has been public for a little more than two years… and has been a rare survivor, let alone thriver, of SPAC-O-Rama. Even after losing more than half its value since I wrote my first report, it still has a market cap of $13.6 billion.

SYM 2-year stock

Cozy Dealings

My original report focused on cozy business dealings between Symbotic, Softbank and the “little-known company” in the Journal story – C&S Wholesale Grocers.

C&S, a private grocery distribution company, just happens to be owned by Symbotic CEO Rick Cohen, who also owns 66.5% of Symbotic.

Also important to this story is a joint-venture formed a bit more than a year ago between Softbank and Symbotic called GreenBox, which is 65%-owned by Softbank.

Enter the short-seller’s report, which attempts to pull all of this crazy and convoluted story together...

The gist of the report’s allegations are that Symbotic’s disclosures have “misled” investors regarding the number of its systems that are being installed at Walmart, its biggest customer. And that it’s being obfuscated through the use of percentage of completion accounting, which gives management leeway in how it recognizes revenue.

The report is exceedingly detailed and includes satellite and drone images (such as the one below) of Walmart warehouses suggesting that there aren’t as many systems installed or revenue potential as investors think.

Page 51 short-seller report

Along Comes the FTC

As it turns out, C&S is prominent in the short-seller’s report, too.

As the Journal points out, C&S is smack in the center of the Federal Trade Commission’s lawsuit to block the merger of Albertsons $ACI and Kroger $KR . The case begins Monday.

According to the newspaper...

To neutralize antitrust concerns, the two chains have agreed to sell 579 stores to the closely held grocery distribution company, which supplies more than 100,000 different products to retailers across the country. C&S also owns or franchises around 160 grocery stores, including Piggly Wiggly and Grand Union. 

But the FTC also goes on to say that “with limited supermarket operating experience” C&S “is a poor choice for a divestiture buyer and increases the likelihood that the divested stores will flounder or fail.”

All of which gets us back to Symbotic and how it seemingly fits into the investigation...