A little known short-seller has managed to crush the shares of Hong Kong’s Techtronic Industries Co., wiping out about $4 billion in market value.
(Bloomberg) — A little known short-seller has managed to crush the shares of Hong Kong’s Techtronic Industries Co., wiping out about $4 billion in market value.
Power-tool maker Techtronic fell 19% in Hong Kong after Jehoshaphat Research questioned the company’s accounting methods in a 60-page report. It comes hot on the heels of Hindenburg Research’s allegations of accounting flaws at India’s Adani Group, which erased more than $140 billion of value in the last month.
Techtronic is Jehoshaphat’s biggest target in terms of market capitalization and the first in Asia. The anonymously operated firm, which claims it specializes in “forensic research on companies that are publicly traded,” didn’t reply to an email seeking comment. It has no address or phone number on its website, while its Twitter account has little more than 3,000 followers.
Techtronic shares had their worst one-day rout since 2008 before trading was halted in Hong Kong on Thursday. Jehoshaphat alleged that the company has been “inflating its profits dramatically for over a decade with manipulative accounting” in the report dated Wednesday. The short-seller sees “60%-80% downside” for the stock.
Techtronic, which has been listed since 1990, said it “vigorously denies all the allegations” made in the Jehoshaphat report and that it applied for a resumption of stock trading from Friday. The company, whose largest client is US-based Home Depot Inc., produces equipment such as drills, lawnmowers and vacuum cleaners under brands including Milwaukee, AEG, Ryobi and Homelite.
“Given India’s recent Adani fiasco, and the market’s already highly downbeat expectations for 2023 results, it seems too early, if not foolhardy, to jump on the Techtronic bandwagon,” said Brock Silvers, managing director at private equity firm Kaiyuan Capital Ltd. in Hong Kong.
Jehoshaphat, which describes itself as a “veteran” short seller, has mainly shorted US-listed companies, including Array Technologies Inc., Ameresco Inc. and Progyny Inc. in the past year. Progyny shares have been unchanged since the short-seller report in early December. The others have either recovered from a knee-jerk reaction on the same day or ended up higher in the next few weeks, relative to market moves.
View Inc. is probably the biggest and only successful call in its previous nine campaigns. The stock lost 92% since being targeted by Jehoshaphat in June 2021.
Techtronic, which was founded by German billionaire Horst Julius Pudwill, reported net income of $578 million for the first half of 2022, a 10% increase year-on-year.
–With assistance from Selina Xu, Jeanny Yu, Cecile Vannucci, Subrat Patnaik and Henry Ren.
(Adds Techtronic statement; Updates throughout with background)
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