Why A Short Seller Doubled Down On Critique Of Energy Stock Up 550% In Past 5 Years

Spruce Point Capital Management produced a short report on Generac Holdings Inc. GNRC in late June, calling the company’s shares materially overvalued while accusing the company of several shady M&A deals.

Spruce Point showed renewed interest in its short report on Wednesday afternoon, following Generac’s second-quarter earnings report, calling it “smoke and mirrors" in a Twitter Inc TWTR thread.

Earnings: Generac has been a top performer in the stock market over the past 10 years with returns of more than 1,000% during that time frame.

The company delivered its second-quarter earnings report on Wednesday morning, beating both the top and bottom lines; here are the numbers:

• 2022 adjusted earnings of $2.99 per share, beating analyst estimates by 13.52%.
• Net sales increased 40% year-over-year and came in at $1.29 billion, beating the consensus mark by 1.57%.
• Demand for Residential and Commercial & Industrial (C&I) products boosted Generac’s second-quarter performance.

Generac didn't immediately respond to Benzinga's request for comment.

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What To Know: Spruce Point took to Twitter during the company’s earnings call to express its concern with some of Generac’s metrics, while recalling its short report.

During the earnings call, Generac CEO Aaron Jagdfeld provided an update on its smart thermostat company Ecobee, which has as its main product a smart thermostat that rivals Amazon.com, Inc’s AMZN thermostat.

“Integration is proceeding as planned,” Jagdfeld said, “we continue to make good progress in finding cross-selling opportunities for Ecobee’s hardware solutions through Generac’s distribution partner.”

Spruce Point chimed on Twitter, “Dear @generac why you are pumping ecobee, why don't you disclose that ecobee is under greater price pressure, $AMZN smart thermostat pricing just hit a new low price of $41.99!”
 

$AMZN competitive product lowered 12.5% in just a month. Good luck here $GNRC #deflation pic.twitter.com/DME9yrWFFe

— Spruce Point Capital (@sprucepointcap) August 3, 2022

Ecobee’s least expensive thermostat, the ecobee3 lite, retails for $149.99.

Generac is down 37.79% in the last year, compared with the industry’s decline of around 32%.

“We believe Generac trades at an undeserved premium to peers,” the report said. “Buyer beware: We estimate 40%-50% downside risk ($110-$132 per share) as Generac’s financial situation deteriorates and lofty analyst expectations are missed.”

Read the full report here, and the earnings call here. 

Photo: Rafapress via Shutterstock