Investment research firm Spruce Point Capital Management issued a "Strong Sell" rating on Perion Network (NASDAQ:PERI) Tuesday, citing concerns about the accuracy of the company's financial reporting, the efficacy of its product suite, and the sustainability of its growth.
Perion shares are currently down over 2% at $31 per share. However, the stock fell as low as $29.62 earlier in the session following the release of the report.
Spruce Point's report outlines several red flags it sees regarding Perion's business, such as "how it generates $1.50m and $0.30m of revenue and EBITDA per employee in the advertising technology industry."
They state the peer average is $0.53 million and $0.07M, respectively, and its performance "puts it on par with technology leaders Apple, Google, Microsoft, and Facebook."
In addition, the short-selling firm says Perion "miraculously generated $233m of cumulative cash flow" since 2020, with "just $2.2m of total capital expenditures, $3.6m of PP&E, and technology and development expense 3x below industry average."
Finally, Spruce Point questioned why Perion has "raised $231m of equity with no clear purpose." The firm concluded that they see a potential 25% to 40% downside in Perion's shares.