Spruce Point Management, a firm focused on short-selling the stocks of companies in dire straits has found its next target in the form of NCR Corporation (NYSE:NCR). The firm today released a damning, 98-page report on NCR, declaring the company a ‘Strong Sell’ with downside risk of 45% to 70%. The report details a wealth of problems with both the company’s operations and its management, including the strong headwinds it is facing in the financial payment sector as retailers move away from point-of-sale technology and begin embracing mobile payment solutions like Square, Apple Pay, and Google Wallet. Spruce Point also took numerous jabs at the company’s management and its accounting practices, declaring its accounting as aggressive and overstated, and noting that many of NCR Corporation (NYSE:NCR)’s top executives came over from Symbol, which was involved in an accounting fraud scandal in the early 2000’s.
Spruce Point notes that bulls on NCR Corporation (NYSE:NCR) believe the activist involvement in the company can help turn it around or generate enough value from the sale of assets to make it a worthwhile investment, but Spruce Point believes this is not the case, and that NCR’s acquisitions were paid for at rich prices. Richard McGuire of Marcato Capital Management now has a seat on the company’s board and is pushing for changes to its capital structure, in addition to exploring various mergers and acquisitions. Another investor, Jason Karp of Tourbillon Capital was also extremely bullish on NCR last year.
“So my pitch today is NCR Corporation (NYSE:NCR). Most people think of this as the old National Cash Register company. This company is over 100 years old. Most people think of it as an ATM company that is just in the hardware business. In fact, most of NCR Corporation (NYSE:NCR) today is driven by their software business. And our contention is that this is in fact a rapidly growing software company inside of a cheap hardware company that no one’s really paying attention to. Our target price is up roughly 150% from here over the next 3 years,” Karp said during an investment conference last summer.
You can see the full presentation from Spruce Point on the following pages.