RIME Drops 39%, Plus Our Deep Dive on Shorting CVNA
"Delving into the seven-year short battle of Carvana, AI freight platform Algorhythm's 40% drop, and research reports on Yelp, STRL, and Nova Minerals!"
Weekly Wrap Up: Sunday, February 22, 2026
This week on Activ8Insights.com we published a deep dive into the seven-year battle to short Carvana. For years, every short report on the used car platform ended with the stock rallying and the bears getting carried out. Gotham City Research's January 2026 report finally broke that pattern, and the piece explores exactly why it landed differently this time. Worth a read if you want to understand how short campaigns actually work when the target is a Wall Street darling. On the research front, four new reports hit this week. The standout was Algorhythm Holdings (ticker: RIME), a former karaoke hardware company rebranded as an AI freight platform, which dropped nearly 40% after Fugazi Research called it uninvestable. Snowcap Research took aim at Sterling Infrastructure (ticker: STRL) over its data center claims, The Bear Cave made a value trap case on Yelp (ticker: YELP), and Spruce Point Capital Management raised questions about the geologist behind Nova Minerals (ticker: NVA) and its resource valuations.
- Fugazi Research targeted Algorhythm Holdings (RIME) alleging the company is a former karaoke hardware business that rebranded as an AI freight platform while financing operations through toxic death-spiral convertibles. Stock closed the week down 39.4%.
- The Bear Cave targeted Yelp (YELP) alleging the company is a classic value trap with a broken sales culture, a damaged brand, and structural headwinds from AI-driven search disruption. Stock closed the week down 2.0%.
- Snowcap Research targeted Sterling Infrastructure (STRL) alleging the company has exaggerated its data center exposure, cannot reconcile its backlog growth with independently verifiable contract win data, and inflates margins through subjective accounting revisions. Stock closed the week up 6.1%.
- Spruce Point Capital Management targeted Nova Minerals (NVA) alleging the company's core resource valuations rest on the credentials of a geologist Spruce Point believes are fraudulent, with management ties to individuals charged by ASIC and the SEC. Stock closed the week up 2.5%.
New from Activ8 This Week
For years, every short report on Carvana ended the same way: with the stock rallying. Gotham City Research's January 2026 report finally broke that pattern, producing a sustained 26.5% decline. This piece examines what changed: FOIA-obtained DriveTime financials revealing over $1 billion in cash burn, and the company's own record-breaking results arriving simultaneously with evidence of accelerating related-party revenue growth. A detailed look at one of the most difficult short trades of the past decade.
New Activist Reports
In the tables below, green indicates a stock decline (favorable for short sellers) and red indicates a stock increase.
Algorhythm Holdings / RIME: Fugazi Research
| Metric | Price | Change |
|---|---|---|
| Close (Day Before) | $3.48 | — |
| Low (Report Date) | $2.52 | -27.6% |
| Close (Report Date) | $2.58 | -25.9% |
| Close (End of Week) | $2.11 | -39.4% |
Stock Price Impact
RIME opened under immediate, sustained pressure on February 17: shares touched a low of $2.52, a 27.6% drop from the prior close of $3.48. The stock recovered slightly to close at $2.58, down 25.9% on the day, but the selling didn't stop there. By the end of the week, RIME had reached $2.11, representing a 39.4% loss from the pre-report price. That kind of continued deterioration after the initial report day is notable. Many short reports see sharp intraday declines followed by partial recoveries; RIME's trajectory moved in the opposite direction, suggesting the market kept digesting Fugazi's allegations throughout the week rather than dismissing them as a one-day event.
About The Company
Algorhythm Holdings trades on NASDAQ under the ticker RIME and bills itself as an AI-powered freight logistics platform. The company is the rebranded successor to The Singing Machine Company, which sold consumer karaoke hardware before renaming to Algorhythm Holdings in late 2024. Headquartered in the United States, the company has minimal reported revenue, negative gross margins, and disclosed going-concern doubts in its own SEC filings. Management has argued that its AI freight technology positions it as a disruptor in the logistics industry: a claim that Fugazi Research directly contests, and which drew skeptical coverage in Barron's from an industry analyst who noted that major shipping operators are already deploying more sophisticated AI agents.
Key Points from the Report
- According to Fugazi Research, RIME is a "dilution-funded shell wrapped in an AI narrative": the company pivoted from selling karaoke machines to claiming AI freight disruptor status in under a year, with no demonstrated change in underlying business fundamentals.
- The report alleges RIME finances operations through a "death-spiral" convertible facility with financier John M. Fife, a structure the report describes as mechanically designed to accelerate share issuance as stock prices fall, enriching Fife while destroying shareholder value.
- Fugazi notes that John M. Fife has previously faced SEC charges in connection with his financing activities, raising questions about the suitability of RIME's capital structure and the company's disclosed risk factors.
- The report concludes that RIME's shares are "completely uninvestable and worthless," citing minimal revenue, negative gross margins, substantial going-concern doubt, and a financing structure that the company's own filings acknowledge could result in significant dilution.
Read the Full Report Summary →
Yelp / YELP: The Bear Cave
| Metric | Price | Change |
|---|---|---|
| Close (Day Before) | $21.69 | — |
| Low (Report Date) | $21.31 | -1.8% |
| Close (Report Date) | $21.48 | -1.0% |
| Close (End of Week) | $21.26 | -2.0% |
Stock Price Impact
The Bear Cave's Yelp report produced a modest but persistent reaction. Shares dipped to an intraday low of $21.31 on the report date, a 1.8% decline from the prior close of $21.69, before recovering partially to close at $21.48, down 1.0% on the day. By end of week, YELP settled at $21.26, a 2.0% decline. The muted reaction is consistent with The Bear Cave's thesis framing: this is not an allegation of fraud or fabrication but rather a structural deterioration argument. The report contends that Yelp's seemingly cheap valuation at roughly 10x earnings and 1x revenue is a trap rather than an opportunity, and that recognition of that structural decline tends to play out over months and quarters rather than in a single trading session.
About The Company
Yelp is a consumer review and local business advertising platform headquartered in San Francisco. The company went public on the NYSE in March 2012 and has remained roughly flat relative to its IPO price in the fourteen years since: a performance that underscores The Bear Cave's value trap argument. Yelp's primary revenue source is digital advertising sold to local businesses, largely via an outbound sales force. The platform competes with Google Reviews, TikTok, Instagram, and newer entrants like Beli for consumer attention in local business discovery. Yelp has faced persistent criticism from small business owners over its advertising practices and review moderation policies, and the company's most recent quarterly results included its first year-over-year revenue decline in four years.
Key Points from the Report
- The Bear Cave alleges Yelp is a classic value trap: despite trading at approximately 10x earnings and 1x revenue, the company faces structural erosion from AI-driven search disruption and competition from TikTok, Instagram, Beli, and Google Reviews that make a recovery in fundamentals unlikely.
- The report points to Yelp's first quarterly year-over-year revenue decline in four years as evidence that the company's deterioration is accelerating, not bottoming: and that the current multiple reflects wishful thinking rather than a genuine floor.
- According to The Bear Cave, Glassdoor reviews from current and former Yelp employees describe a deeply dysfunctional sales environment characterized by extreme outbound call pressure, impossible monthly metrics, high turnover, and allegations of dishonest sales practices: with multiple reviewers calling it "one of the worst sales positions you can have."
- The report argues that the transition from web search to AI agents represents a structural threat that will accelerate Yelp's decline, as fewer users will navigate to Yelp via traditional search queries: undermining the traffic funnel that supports its advertising business.
Read the Full Report Summary →
Sterling Infrastructure / STRL: Snowcap Research
| Metric | Price | Change |
|---|---|---|
| Close (Day Before) | $410.63 | — |
| Low (Report Date) | $394.63 | -3.9% |
| Close (Report Date) | $415.13 | +1.1% |
| Close (End of Week) | $435.50 | +6.1% |
Stock Price Impact
Snowcap's report on Sterling Infrastructure produced a sharp intraday reversal rather than a sustained decline. Shares initially sold off to a low of $394.63 on the report date, a 3.9% drop from the prior close of $410.63: but buyers stepped in and STRL closed the day at $415.13, actually up 1.1% from where it started. By week's end, the stock had gained further, closing at $435.50 for a 6.1% weekly gain. That kind of reversal is not unusual for short reports targeting large-cap companies with strong institutional ownership and ongoing growth narratives. Snowcap published detailed allegations, but the market's response suggests investors either found the thesis unconvincing or viewed the intraday dip as a buying opportunity. This is a short report to watch over the coming quarters as backlog data and contract wins either corroborate or contradict Snowcap's analysis.
About The Company
Sterling Infrastructure is a construction and infrastructure services company headquartered in The Woodlands, Texas, trading on the NASDAQ under STRL. The company operates across three primary segments: E-Infrastructure (data centers and industrial), Transportation, and Building: and has experienced a dramatic rerating in recent years as investors embraced its exposure to data center construction. STRL's stock has gained nearly 20x from its lows as management positioned the company as a beneficiary of the AI infrastructure buildout. The company's E-Infrastructure subsidiary has become the centerpiece of its growth narrative, with management citing "100 or so" data center projects as evidence of deep penetration in the sector. Snowcap Research directly challenges those claims.
Key Points from the Report
- Snowcap's forensic analysis of subsidiary websites, ENR industry publications, and project-level disclosures found only 18 data center projects since 2020: against management's claim of "100 or so": with 50% of those 18 projects concentrated in a single state, Georgia.
- The report alleges that E-Infrastructure's backlog reportedly grew $600 million since 2021, but independently verifiable ENR contract win data can only account for $159 million of that growth, leaving $441 million unexplained: and new contract wins actually declined 10% in fiscal year 2024.
- According to Snowcap, nearly half of STRL's reported EBIT is driven by subjective accounting revisions rather than underlying operational performance, making reported margins difficult to reconcile with peer contractors and inflating the appearance of profitability.
- Snowcap concludes that even taking management's margin figures at face value, a re-rating to contractor peer multiples implies roughly 60% downside from current levels at 23x EV/EBITDA: and that STRL is "a poster child for the AI bubble in public markets."
Read the Full Report Summary →
Nova Minerals / NVA: Spruce Point Capital Management
| Metric | Price | Change |
|---|---|---|
| Close (Day Before) | $6.29 | — |
| Low (Report Date) | $6.23 | -1.0% |
| Close (Report Date) | $6.45 | +2.5% |
| Close (End of Week) | $6.45 | +2.5% |
Stock Price Impact
Spruce Point published its Nova Minerals report on Thursday, February 20, giving the market less than a full session to react before the week's close. The initial response was muted: shares dipped briefly to a low of $6.23, just 1.0% below the prior close of $6.29, before recovering to close at $6.45, up 2.5% on the day and unchanged through end of week. Published late in the trading week, NVA effectively didn't have time to absorb the full weight of Spruce Point's allegations. The seriousness of the thesis: which goes to the credibility of the geologist validating all of the company's resource estimates, and to the tenure of a key government grant: means the market's initial reaction should be treated as a starting point rather than a verdict. Spruce Point's price target implies 45% to 60% near-term downside, with up to 100% loss potential in a worst-case scenario.
About The Company
Nova Minerals Limited is a junior mineral explorer focused on gold and antimony assets in Alaska. The company is dual-listed on the ASX and NASDAQ under the ticker NVA, with its primary asset being the Estelle Gold Project: a remote property in the Alaska Range that previous owners abandoned before Nova acquired it. The company has received a $43.5 million Department of War grant to support development of its antimony assets, a funding source that Spruce Point argues is at risk. Nova's resource estimates, which form the foundation of the company's perceived value, are validated by a geologist whose academic credentials Spruce Point contends cannot be verified. The company faces significant infrastructure challenges, as the Estelle project sits in one of the most remote and logistically difficult environments in North America.
Key Points from the Report
- Spruce Point alleges that Nova Minerals' resource estimates: the primary basis for the company's valuation: are validated entirely by a geologist whose claimed academic credentials appear to be fraudulent and cannot be independently verified; if those credentials are formally invalidated, Spruce Point warns that all resource estimates may need to be restated.
- The report raises alarm over management and board connections to individuals who have faced market manipulation charges from both the Australian Securities and Investments Commission (ASIC) and the U.S. Securities and Exchange Commission.
- According to Spruce Point, the Estelle project has a chronic history of missed production timelines and faces insurmountable infrastructure challenges in one of the most remote operating environments on Earth: the same conditions that led previous owners to abandon the project.
- Spruce Point's price target range implies 45% to 60% near-term downside, based on a 15x–24x EV/Resource multiple versus Alaskan peers, with up to 100% downside in a worst case if the geologist's credentials are invalidated and the $43.5 million Department of War funding is revoked.
Read the Full Report Summary →
Activ8 Newswire
Short seller campaign volume hit a five-year high in 2025, with AI and software stocks drawing the most fire: A new analysis finds 166 activist short campaigns launched last year, surpassing the prior high of 128 set in 2021, with 55 targeting tech companies. Newer firms are entering the space, including Arizona-based BMF Capital, whose founder Frankie Gerola argues that narrative-driven AI stocks "usually precede capital stress or poor fundamentals." Average short campaigns returned 7.2% after 30 days in 2025. Source: Business Insider
D-Wave CEO dismisses short attacks as stock triples since Kerrisdale Capital's bearish report: D-Wave Quantum CEO Alan Baratz says short sellers are motivated purely by profit after the company's stock tripled following Kerrisdale's April 2025 report alleging customers saw "zero benefit" from its technology; D-Wave has since announced a $550 million acquisition of Quantum Circuits Inc. and claims 3x revenue growth and over 100 paying customers. Source: Yahoo Finance
Los Angeles County sues Roblox over child safety on the platform: LA County filed suit against the gaming giant on February 20, 2026, alleging the platform failed to adequately protect minors from exploitation and harmful content: the latest in a series of legal and regulatory challenges facing Roblox that short sellers have previously flagged as material risks. Source: The Guardian
