XPO fends off short seller attack with stock buyback
CONNECTICUT-BASED XPO Logistics Inc has recovered part of its recent record 26 per cent share price plunge as the company responded to a short seller's attack with a stock buyback
CONNECTICUT-BASED XPO Logistics Inc has recovered part of its recent record 26 per cent share price plunge as the company responded to a short seller's attack with a stock buyback.
The shares dived after Spruce Point Capital Management warned of 'unreliable and dubious financials' at the trucking and warehouse operator. The short seller also called out XPO's heavy debt burden and said management had lost investors' confidence, reported Bloomberg.
Deutsche Bank, echoing the analysis of other firms, responded that it had found 'highly misleading statements and inaccuracies related to basic calculations' in Spruce Point's report. XPO, meanwhile, authorised the repurchase of up to US$1 billion in stock. In New York the shares had recovered 13 per cent in value.
Negative sentiment was exacerbated earlier last week when XPO pared its 2019 profit outlook, and then was compounded by Spruce Point's report.
XPO's reduced guidance notwithstanding, its growth target of at least 12 per cent on top of a strong freight environment ''s not exactly suggestive of end of days,' Stifel Nicolaus analyst Bruce Chan said in a note. The cargo market 'remains quite healthy.'
XPO's buyback will be funded by cash, a revolving credit facility and other sources.
'XPO has pitched itself as a growth company and this does nothing to further the growth of XPO's operational results,' wrote Stephens Inc analyst Jack Atkins. The buyback is 'a knee-jerk reaction.'