Investing.com -- Muddy Waters (NYSE:WAT) Research has taken a short position on FTAI Aviation Ltd. (NASDAQ: FTAI), causing a 4% fall in the company's shares.
The research firm has accused FTAI Aviation of misleading financial reporting, stating that the company's revenue from maintenance and individual module sales is significantly less than what is reported.
Muddy Waters claims that FTAI Aviation has been deceiving investors by recording one-time engine sales as Maintenance Repair & Overhaul (MRO) revenue in its Aerospace Products (AP) segment. This alleged misrepresentation has led to an apparent growth story in FTAI's AP revenue, which Muddy Waters believes is largely due to asset sales, specifically the sale of whole engines.
The research firm estimates that roughly 80% of FTAI Aviation's adjusted EBITDA in the Aerospace Products segment comes from gains on sales, which they believe is primarily from selling entire engines. Muddy Waters suggests that the motive behind these alleged misrepresentations is to generate a valuation significantly larger than that of a leasing business.
The research firm also pointed out that Fortress, a major shareholder, sold a substantial amount of stock in a secondary offering in May 2024, which they believe was based on FTAI Aviation's misleading narrative.
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