OSI Systems, Inc. OSIS
OSIS is rotten to the core: the Albania concession was obtained via an apparent bribe, the Mexico turnkey is egregiously priced and up for renewal, and FCPA liability could erase a large chunk of the $1.6bn market cap.
Thesis
Muddy Waters is short OSI Systems (OSIS) on the thesis that the company is structurally corrupt. In 2013 OSIS's Rapiscan subsidiary transferred 49% of its Albanian concession-holding vehicle, S2 Albania SHPK, to a hospital-founding doctor (Olti Peçini) for roughly $4.50 — a transaction Albanian media calls the 'Theft of the Century' and which OSIS's U.S. financials do not reflect (no minority-interest line, 2017 bond docs show S2 Albania as wholly owned). The Mexico turnkey contract, at an estimated ~55% EBITDA margin, accounted for more than 50% of FY2017 EBITDA despite being only 15% of revenue, and is up for 2018 renewal. Muddy Waters argues FCPA liability — benchmarked against Telia's $966M settlement — plus Mexico repricing and former-employee accounts of bribery, debarment near-misses and 'half-built' machines make the business unsustainable.
SCQA
OSI Systems' Rapiscan unit sells cargo- and vehicle-scanning turnkey contracts to foreign governments, with Mexico and Albania among the largest awards and the Security Division supplying U.S. and European government agencies.
OSIS apparently bribed its way into the 2013 Albania concession by giving away 49% of S2 Albania SHPK for $4.50, failed to book the minority interest, and leans on a Mexico contract at an implausible ~55% EBITDA margin that is up for 2018 renewal.
Short the stock: Muddy Waters argues the facts, former-employee accounts of cash-in-envelopes and near-debarment, and likely FCPA enforcement make the business model unsustainable.
FCPA settlements in the hundreds of millions (cf. Telia's $966M) plus Mexico repricing or non-renewal could wipe out a material portion of OSIS's $1.6bn market cap.
The three reasons
- 1
OSIS transferred 49% of its Albania concession to a doctor for $4.50 — apparent bribe
- 2
Mexico turnkey contract (~55% EBITDA margin) drives >50% of FY17 EBITDA and faces 2018 renewal
- 3
FCPA exposure could equal a significant chunk of market cap — cf. Telia's $966M settlement
Primary demands
- Investigate the 2013 Albania concession award and the $4.50 transfer of 49% of S2 Albania SHPK
- Restate accounts to reflect the undisclosed minority interest in S2 Albania
- Disclose FCPA exposure tied to Albania and other turnkey jurisdictions
- Justify the ~55% EBITDA margin on the Mexico turnkey contract up for 2018 renewal
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- Telia Company FCPA settlement (~$966M, September 2017)
- Muddy Waters' own 2015 Telia short call
Notable slides (6)
Notes
Classic Muddy Waters Word-memo format with embedded screenshots (Albanian corporate registry, media headlines, YouTube thumbnails, a Deniro 'Analyze This' meme, and an earnings-call quote block). Strong narrative craft but zero slide-deck design — the specimen value is rhetorical, not visual. Report frames corruption as both a moral and an FCPA/market-cap risk; uses OSIS's own Aug 2014 conference-call quote ('keep stillness inside of you') as a CEO-contradiction beat. No explicit price target or position size disclosed beyond 'we are short'. Note: author_name uses the form printed on p.1 ('Carson C. Block, Esq.').