Kornit Digital Ltd. KRNT
Kornit's 2018 boom was an Amazon warrant-and-rebate illusion — 105% of cash flow came from one customer, a scandal-tainted CFO is covering it, leaving 75-85% downside to $4.50-$9.30.
Thesis
Kornit Digital's share-price run (up 55% YTD, near all-time highs) rests almost entirely on 2018 results that Spruce Point argues were engineered: forensic warrant-vesting math shows 105% of 2018 operating cash flow ($35m of $33.4m) came from gross Amazon payments tied to a Master Purchase Agreement, while rebates, discounted list prices, and warrant accounting masked organic decline. Spruce Point flags that CFO Guy Avidan was previously CFO of MRV Communications during its option-backdating scandal and that Kornit backdated warrant expense into Q4'16 before the Amazon deal. With Amazon dropping Merch from its shareholder letter, program growth plateauing, and the next leg of expansion heading to Japan where competitors Brother, Ricoh, and Seiko dominate, Spruce Point models 75-85% downside to $4.50-$9.30 on peer-aligned sales and cash-flow multiples.
SCQA
Kornit Digital is an Israeli digital textile printer selling direct-to-garment machines to brands and on-demand fulfillers; 2018 revenue hit $142m (24.8% growth) driven by a Master Purchase Agreement with Amazon's Merch program.
Forensic work on warrant vesting shows 105% of 2018 operating cash flow came from Amazon gross payments; Merch growth is plateauing, the CFO led MRV Communications through its option-backdating scandal, and Amazon's Japan push favors local competitors.
Spruce Point is publicly short and recommends investors sell, demanding disclosure of rebate terms, reconciliation of Amazon revenues, and scrutiny of a CFO and warrant-accounting pattern it believes front-loaded expense to inflate future results.
Repricing Kornit at peer sales and operating-cash-flow multiples (1.0-1.3x sales, 8-12x OCF) implies a $4.50-$9.30 share price versus $28.14, or 75%-85% downside for short-sellers.
The three reasons
- 1
105% of 2018 operating cash flow came from one-off Amazon warrant/rebate payments now tapering
- 2
CFO led MRV Communications during its option-backdating scandal and delisting
- 3
Kornit trades at 43x OCF vs. 9x peer median with Amazon Japan expansion likely to bypass Kornit
Primary demands
- Investors should sell Kornit shares given 75%-85% downside risk
- Reassess reliance on CFO previously implicated in MRV Communications option-backdating scandal
- Demand disclosure of Amazon rebate terms, warrant accounting and reconciliation of 2018 Amazon revenues
- Require cash-flow-based performance metrics, not just top-line growth
KPIs cited
Pattern membership
Precedents cited
- Caesarstone (Spruce Point short, 2015)
- Amdocs (Spruce Point short, Jan 2019)
- InnerWorkings (Prescience Point/Spruce Point short, 2013)
- iRobot, Sabre Corp — prior shorts flagged by distributor acquisitions
- MRV Communications option-backdating scandal (CFO precedent)
Composition what's on the 60 slides
Slide gallery ·
Notes
Signature Spruce Point forensic short: cover uses a photoreal 3D render of a printer stamping 'STRONG SELL' on t-shirts with vinegar jug and rats — a rare piece of editorial wit on an otherwise standard institutional template. Core evidence is the warrant-vesting back-solve on page 13 deriving 105% of OCF from Amazon, plus bill-of-lading shipment records (pp.23-25) cross-checking disclosed Amazon revenue. Author/signatory not explicitly on cover; attributed to Ben Axler as founder per page 3. Villain is primarily the CFO (option-backdating history) rather than the CEO. Precedent-heavy rhetorical structure (Caesarstone, Amdocs, InnerWorkings) typical of Spruce Point playbook.