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Maxar stock plunges after short-seller says space company's dividend is at risk

Last Updated Aug 7, 2018 at 6:20 pm EDT

TORONTO – Maxar Technologies Ltd. stock plunged Tuesday after the formerly-named MacDonald Dettwiler and Associates was targeted by a analyst report from an acknowledged short-seller firm.

The company’s shares ended down $7.59 or 13.15 per cent at $50.14 on the Toronto Stock Exchange after Spruce Point Capital Management issued a press release that warned, among other things, that Maxar’s dividend is at risk.

Spruce Point also set an intermediate price target for Maxar stock in the range of US$20 to US$25 per share — about half of Maxar’s previous 52-week low of US$42.11 on the New York Stock Exchange.

Maxar said Spruce Point’s report contains a number of inaccurate claims and misleading statements.

“Maxar believes it is a direct attempt by a short-seller to profit, at the expense of Maxar shareholders, by manipulating Maxar’s stock price,” the company said in a statement.

A decline in stock prices tends to benefit short sellers that plan to buy the shares after they’ve fallen.

Maxar stock had already fallen every trading day since the space technology company reported second-quarter financial results on July 31.

However, 10 out of 11 analysts tracked by Thomson Reuters Eikon rated Maxar a “buy” or “strong buy” on Tuesday and none rated it a “sell” or “strong sell. The mid-point of their estimates was C$62.32.

Short-selling is a normal technique used by investment managers and some active individual traders but it is uncommon for firms to issue press releases to draw attention to their analysis.

Previous campaigns by other short-sellers have drawn attention to significant problems at Valeant Pharmaceuticals International, now renamed Bausch Health Companies Inc., and Sino-Forest Corp.

Spruce Point Capital said Maxar may generate US$50 million or less of free cash flow in 2018, after interest expenses and capital spending, leaving “little room” for its US$68 million per year of dividend payments.

It also said MacDonald Dettwiler’s acquisition of Space Systems Loral in 2012, and DigitalGlobe in 2017, were poorly timed and executed.

MDA — known for providing equipment to the International Space Station, U.S. Space Shuttle program and the Canadian government — changed its name to Maxar last October as part of its DigitalGlobe deal.

Companies in this story: (TSX:MAXR)

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