Spruce Point believes Generac shares are “materially overvalued” as the company “struggles to suppress core business challenges, while pivoting towards a highly speculative and unproven acquisition spree in clean energy products and services.” The short-selling firm, which believes Generac was “an extreme COVID-19 beneficiary,” finds what it calls “recent evidence that Generac fails to discuss that its core portable generator business is under extreme pressure.” Generac also has “subtly updated” its “Forward Looking Statements” warning of a potential government investigation as it has been dealing with product recalls due to safety issues, according to the firm. The firm believes Generac trades at “an undeserved premium to peers” and after “heavily promoting its recent clean energy acquisitions,” recently guided down margins and blamed it on, “the start-up nature” of the acquisitions, Spruce Point said. The firm estimates 40%-50% downside risk to $110 – $132 per share as “Generac’s financial situation deteriorates and lofty analyst expectations are missed,” it concluded.
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