- Spruce Point Capital Management, a prominent U.S. investment manager, has opened a short position in WSP Global (TSX:WSP), a global engineering and professional services firm it believes to be significantly overvalued
- Spruce’s short report sees 25 to 50 per cent in downside risk for the stock, representing a C$110-C$165 drop per share
- WSP Global is one of the largest professional services firms in the world with more than 66,500 employees
- Shares of WSP Global have added 19.91 per cent year-over-year and 184.07 per cent over the past five years
Spruce Point Capital Management, a prominent U.S. investment manager, has opened a short position in WSP Global (TSX:WSP), a global engineering and professional services firm it believes to be significantly overvalued.
Spruce Point’s short report claims WSP is under more stress than is evident because of misleading financial reporting and accounting revisions, lack of board diversity and excessive acquisitions, resulting in 25 to 50 per cent in downside risk for the stock, representing a C$110-C$165 drop per share.
A quick review of WSP’s recent financial performance plays devil’s advocate to the report, revealing that the industrial stock grew revenue by 61 per cent from C$8.9 billion in 2019 to C$14.4 billion in 2023, while growing net income by 92 per cent from C$286 million in 2019 to C$550 million in 2023.
The short seller is prepared to hold the position for multiple years, if needed, thanks to high conviction in its forensic financial and accounting review, which is only strengthened by WSP’s heavy insider selling, high employee turnover and tepid growth prospects.
The report is a green flag for Stockhouse readers to look into WSP Global for their own shorts, or a potential turnaround play should the company heed to Spruce’s demands, including an internal investigation into the report and a board shakeup to better represent how only 20 per cent of its business is in Canada.
Spruce Point’s reputation in the short-selling space is as ironclad as it gets, having bet against numerous high-profile Canadian companies to great success. Its positions in fintech darlings LightSpeed (TSX:LSPD) and Nuvei (TSX:NVEI) dropped by 90 per cent and 86 per cent, respectively, after publishing similar reports, while its position in dairy company Saputo (TSX:SAP) fell by 25 per cent.
Alain Michaud, WSP’s chief financial officer, told BNN Bloomberg that the company is currently reviewing Spruce Point’s short-seller report.
About WSP Global
WSP Global is one of the largest professional services firms in the world with over 66,500 employees. It provides strategic advisory, engineering and design services with a sustainable focus across the transportation, infrastructure, environment, building, energy, water and mining sectors.
WSP Global (TSX:WSP) last traded at C$208.45 per share. The stock has added 19.91 per cent year-over-year and 184.07 per cent over the past five years.
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