A short report issued by Spruce Point Capital on Tuesday raises concerns about the financial practices of Perion Network, Ltd. (NASDAQ:PERI). The short seller is questioning the company’s reporting and growth sustainability, with the report stating the situation could result in “sloppy and error-prone reporting, and at worst case manipulative accounting and reporting practices.”
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Key points raised in the Spruce Point Capital report include:
- Perion’s high revenue and EBITDA per employee, well above the industry average and on par with tech giants like Apple and Google, prompts questions about how this is achieved.
- The company generated substantial cash flow since 2020 with minimal capital expenditure, significantly below the industry average. The purpose behind raising $231 million of equity remains unclear.
- The CEO and audit chair previously worked at Lumenis, where executives faced SEC charges for inflating revenue. A Perion VP faced allegations of misconduct in a previous role.
- Opacity in revenue recognition disclosures and questions about acquisitions fuel performance, specifically the acquisition of Content IQ, also came under scrutiny.
- Spruce Point Capital points to misstatements in revenue reporting and potential issues with the promoted technologies and platforms.
- The report noted that the company’s audit partner had past associations with other troubled Israeli companies.
The short report also asks why, given Perion’s seemingly impressive results, the stock hadn’t attracted any significant technology specialist growth investors and why insider ownership remains below 1% of the company. Spruce Point Capital reiterated a “Strong Sell” opinion on PERI, citing a 25%-40% potential downside risk.
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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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