The short seller, Spruce Point Mgmt., accused the Canadian company of not disclosing the installed customer base for its Sterizone VP4 sterilizer as promised this year because, “if it did, investors might see just how poor its product’s end market acceptance actually is.”
“TSO3 even stopped disclosing consumables sales in Q2’16. It currently recognizes as revenues shipments to Getinge, its 3rd-party distributor (183 units since Q1’16). However, our math and field checks suggest at best 10 units are actually installed at end customers (95% difference to shipments),” the short seller alleged.
The company is also over-estimating its total addressable market, Spruce Point alleged, accusing TSO3 of “baiting investors with big addressable market opportunities” by over-stating its market potential by more than 30% of units and C$170 million ($135.6 million).
The report spurred a run on TOS shares yesterday, prompting the company to issue a statement that it was “not aware of any undisclosed material change to the corporation’s business or operations that would cause today’s unusual trading activities in the corporation’s stock and has no material change to report at this time.”
Still, investors pushed TOS share down as much as -20.2% yesterday, before settling at a C$2.34 close, for an -8.9% loss on the day. The stock recovered somewhat today, rising 2.1% to C$2.39 per share.
($1 = C$1.25378)
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