Activist short-seller Spruce Point Capital Management is taking aim at medical device company Stryker (SYK).
Spruce Point unveiled its latest attack on Wednesday, saying Stryker has overpaid for recent acquisitions, has used questionable accounting practices and has executive compensation that isn’t aligned with shareholder interests. The activist has called on Harvard Business School dean and Stryker audit committee member Srikant Datar to evaluate its findings with “independent forensic investigators.”
Spruce Point also takes the Stryker family to task for consistent selling of stock.
The short-seller — led by Ben Axler, known for prior short calls on Oatly and Toostie Roll — says Stryker shares deserve to plunge 35% to 70%.
“Stryker commands the highest valuation in the medical products industry, but we believe its multiple should compress as its size and leverage now inhibits its acquisition strategy where 60%+ of its capital is deployed. We highlight that during its November 2021 Analyst Day, Stryker modified its written ‘Long-term sustainable financial growth’ to qualify for ‘adjusted’ EPS growth and weakened its wording of EBIT improvement over the next five years. Stryker’s product portfolio is deflationary, and the company is exposed to inflationary input costs that are forcing gross margin pressures Stryker can no longer ignore these issues. We believe investors should penalize Stryker for its delays in right-sizing its operational footprint which are amplifying its problems. We believe Stryker is more levered and expensive than it appears,” Spruce Points writes in a letter obtained by Yahoo Finance.
Stryker shares are up 8% in the past year compared to a 12% return for the S&P 500.
“Stryker is continuing to successfully execute on its strategic plan to accelerate global growth and deliver long-term value, while being transparent with our investors and the financial community. We value engagement with our shareholders and their perspectives and are open to engaging with other stakeholders in a constructive manner,” a Stryker spokesperson told Yahoo Finance via email.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit
Source: https://finance.yahoo.com/news/short-seller-spruce-point-capital-rips-stryker-in-scathing-new-attack-says-stock-could-crash-up-to-70-133057097.html