WSP Global Inc. WSP
WSP Global is a $27bn engineering roll-up masking financial stress with accounting tricks, scandalous leadership, and tax-evasion allegations — Spruce Point sees 25-50% downside to C$110-$165.
Thesis
Spruce Point issues a Strong Sell on WSP Global, a $27bn Montreal-based engineering roll-up trading at a premium 16x 2024E EBITDA. The firm's forensic review uncovers a scandalous leadership history — Vice Chair Pierre Shoiry was sanctioned by Quebec's Order of Engineers, and Chairman Christopher Cole scrubbed his bio of a 2014-2019 Redcentric chairmanship marred by accounting fraud. Spruce Point alleges WSP is masking growing strain via vague backlog redefinitions, a switch from monthly to periodic cost reviews, an oversized Wood E&I provision account that violated IFRS guidance and boosted EBITDA, and free cash flow conversion of just ~38% vs. 110% promoted. A whistleblower in India alleges tax evasion through Cyprus entities. With CPPIB selling 2.5m shares and the Audit Committee captured by a Montreal old-boys club, Spruce Point sees 25-50% downside to C$110-$165.
SCQA
WSP Global is a $27bn TSX-listed engineering and professional services roll-up that has acquired 22 companies for $4.3bn since 2020 and trades at a premium 2.8x revenue and 16x 2024E EBITDA on belief it is a world-class operator.
Forensic review reveals scandalous leadership (Vice Chair sanctioned, Chair tied to Redcentric fraud), vague backlog and DSO definitions, loosened revenue recognition, an oversized Wood E&I provision flattering EBITDA, and a whistleblower alleging Cyprus-routed tax evasion.
WSP should overhaul its Montreal-clubby Audit Committee and form an independent committee to evaluate Spruce Point's findings, improve disclosure on backlog, DSOs, and corporate structure, and investigate the tax-evasion whistleblower claim.
Reverting WSP's premium multiple toward industry peers implies 25-50% downside to a C$110-$165 share price (vs. C$226 current) — a 35-49% move on EBITDA-multiple math against a +8% sell-side consensus upside.
The three reasons
- 1
Scandalous leadership: Vice Chair sanctioned by Quebec Engineers; Chair tied to Redcentric accounting fraud
- 2
Accounting gamesmanship: vague backlog redefined, revenue recognition loosened, provision account boosted EBITDA
- 3
Free cash flow conversion ~38% vs. 110% promoted; whistleblower alleges tax evasion via Cyprus entities
Primary demands
- Overhaul WSP's Audit Committee, currently stacked with Montreal-based business executives
- Form an independent committee to evaluate Spruce Point's findings
- Improve financial transparency on revenue contributions, backlog definition, and corporate organizational structure
- Investigate whistleblower allegations of tax evasion involving entities in Cyprus
KPIs cited
Pattern membership
Precedents cited
- Chicago Bridge & Iron (CBI) — purchase-price manipulation short, Buffett invested then collapsed
- Redcentric plc — UK accounting scandal under Chairman Christopher Cole's watch, stock fell 70% intraday
- Lightspeed (LSPD) — prior Spruce Point Montreal short, -90%
- Nuvei (NVEI) — prior Spruce Point Montreal short, -86%
- Saputo (SAP) — prior Spruce Point Montreal short, -25%
Composition what's on the 68 slides
Slide gallery ·
Notes
Classic Spruce Point short-report structure with cartoon cover (train-wreck pig), exec summary, scandal history, accounting forensics, and downside valuation. Notable rhetorical moves: side-by-side bio screenshots showing Cole 'scrubbed' Redcentric mention; year-over-year disclosure-language diffs (backlog, revenue recognition, STIP); CBI/Buffett analogy used as warning template. No SOTP — pure multiple-compression argument. No stake disclosed (typical for short reports — Spruce Point discloses short position generically in disclaimer but not %). Date inferred from filename and disclaimer cadence (April 3, 2024).