Callouts & quotes from 291+ activist slides

"Even if the market simply applies its existing 15.4x EV/EBITDA multiple to our more realistic view of Adj. EBITDA and adopts our calculation of net debt, the stock could have 30% downside. However, with Verint not growing organically, we value VRNT on the basis of a forward-year EV/EBITDA multiple, but on trailing Adj. EBITDA. With faster-growing and higher-quality industry peers trading at 10-11x forward-year EBITDA multiple, we believe that VRNT should trade at 8-10x forward EBITDA, implying a share price of $17-25 for 60-70% downside."

"This is simply not true. This cash would only be available to pay principal on debt and pursue further acquisitions in an imaginary world where this cash had not already been spent on severance, restructuring and other exit costs as well as transaction and integration costs, which left them with only $4.3 million of real free cash flow in 2018 – enough to pay down a whopping 0.13% of the principal on GTT’s debt."

"[T]he outsiders (who often had complicated balance sheets, active acquisition programs, and high debt levels) believed the key to long-term value creation was to optimize free cash flow, and this emphasis on cash informed all aspects of how they ran their companies – from the way they paid for acquisitions and managed their balance sheets to their accounting policies and compensation systems."

"Mr. Prittie’s alleged shortcomings were tied to his perceived failure to come to grips with Tyler and OneMove’s concerns over the Company’s financial status, share price performance, leadership, strategic vision and strategy, corporate governance, CEO compensation, excessive M&A activity, debt leverage to cash flow ratios and the lack of guardrails around senior management decision making."

"There's already evidence that Porch is failing to meet its financial objectives. The Company claimed it would complete the transaction with $205m of cash and no debt. Yet, it ended up with more cash than projected, but its debt balance is still claimed to be $40m in Porch's investor presentations. This figure is actually contradicted by Porch's 2020 10-K to be $50.8m(1)"

"Spruce Point believes Broadridge should have ceased capitalization of additional costs with the UBS project last year given delays and cost overruns. As a result, had the latest capitalized conversion and start-up costs been expensed, Broadridge would have been in violation of its “Leverage Ratio” covenant, which limits it to 3.5x Total Debt to EBITDA."

"The proxy statement depicts Xylem’s ability to retire Evoqua’s debt and pay transaction costs entirely with cash and equivalents from the balance sheet. However, the balance sheet below also assumes that Xylem has frictionless and unfettered access to all of its cash even though 86% of cash is in foreign markets and may not be freely convertible."

"Assuming Mettler made the $242m of permanent capital injection into the HK entity, our working theory is that it would have experienced a capital shortfall and needed to raise more debt. However, the fact that it did not suggests it maybe shuffling the money around internally, potentially to show auditors in China evidence of accumulated profits."

"Spruce Point believes AMR is an ESG nightmare. Environmentalists and the public should be outraged to think AMR believes shareholders deserve rewards at this point. Spruce Point finds hidden liabilities, debts due to mine reclamation costs, pensions costs and compensating workers for black lung disease amounting to approximately $740 million."

"As of the publication date of a Muddy Waters report, Muddy Waters Related Persons (defined below) are SHORT the securities of or derivatives linked to Eurofins Scientific SE (the “Covered Issuer”), and therefore will likely realize significant gains in the event that the prices of either equity or debt securities of a Covered Issuer decline."

"Xylem portrayed its ability to retire Evoqua’s debt and pay transaction costs with available cash from Evoqua and existing cash on its balance sheet. Total debt was illustrated to be $2.0 billion. However, in reality Xylem’s current debt rose over $500 million and it quickly filed a shelf registration the day after its Q2 2023 earnings call."

"HASI’s claims should be subordinated to the tax equity partners and project debt holders. With significant debt on a project that has generated substantial losses since inception, color us skeptical that HASI will be able to hit its hurdle rate (let alone avoid a loss) over the remaining ~12 years of the project’s 13-year contract life."

"AMR uses a discount rate for certain pension obligations near 2.6%, its weighted average financing lease expense is 9.6%, and its Term-Loan interest cost is 10%. Using these range of assumptions for its incremental borrowing cost, we estimate that AMR’s “Hidden” Interest-Bearing debt obligations are $138 to $690 million."

"It appears CTC is more inclined to sell properties than it was in the past. In 2018 and during the first half of 2019, CTC drastically increased the value of sales. This is concerning given that CTC’s debt load has grown substantially over this time. We believe this is a sign the company is strapped for cash."

"Based on our research and conversations, we believe recent acquisitions executed under Farrell and Dierker have been poorly planned and executed, and more aggressively structured (notably with earnouts) – insult to injury given the large multiples paid for these deals and rising debt load to fund the deals."

"Looking carefully, we see the UK subsidiary added a new "key source of estimation uncertainty" related to trade receivables. The Company disclosed a bad debt provision amounting to 5.5% of gross receivables. We observe this is materially higher than Generac's consolidated bad debts provision of just 1.5%."

"Ares Capital marked Soil Safe's equity at zero and booked a $13m “net realized gain”. This suggests the deal was close to the value of the debt's fair value. The double digit interest rates paid by Soil Safe at a time of ultra low borrowing costs illustrate that Soil Safe was a deeply distressed company."

"MAXR appears “cheap” on its inflated Non-IFRS metrics. However, Spruce Point’s forensic analysis unravels its aggressive accounting methods used to inflate EBITDA and EPS. Furthermore, when its debt is adjusted for standard credit agency adjustments, we find leverage to be in excess of its 5.8x covenant"

"Without taking on any debt or implementing any additional operational improvements, Bristol-Myers will have the ability to use ~$37 billion of cumulative unlevered free cash flow over the next five years to execute a “String of Pearls” strategy (i.e. in-licenses, partnerships, small acquisitions)"

"Without taking on any debt or implementing any additional operational improvements, Bristol-Myers will have the ability to use ~$37 billion of cumulative unlevered free cash flow over the next five years to execute a “String of Pearls” strategy (i.e. in-licenses, partnerships, small acquisitions)"

"Without taking on any debt or implementing any additional operational improvements, Bristol-Myers will have the ability to use ~$37 billion of cumulative unlevered free cash flow over the next five years to execute a “String of Pearls” strategy (i.e. in-licenses, partnerships, small acquisitions)"

"The central element in the scheme which is now proposed is that Certificates of Indebtedness, which are issued by the Exchange Fund to the note-issuing banks to be held as cover for their note issues, should henceforth be issued and redeemed against foreign currency (US dollars) at a fixed rate."

"We provide evidence that since 1999, the Company has generated a cash flow deficit of -$1.6bn after capital expenditures, business investment, and asset-shuffling and repositioning, while making +$4.7bn and +$3.9bn of dividends and share repurchases effectively through debt-financing."

"Spruce Point believes that PLUG cannot issue equity or raise debt fast enough to support its current restricted cash build - and, therefore, cannot continue to support customer leases through operating-type leasebacks, the source of the Company's recent "inflection" to profitability."

"From Greenlight's point of view, regardless of whether the scope of the audit has changed, whoever approved the Velocita debt and warrant valuations at cost at the end of 2001 and the other criticized investments and valuation methods did not provide appropriate critical scrutiny."

"Using our most conservative assumptions, and assuming the conversion of all unsecured debt into equity at the cap rate implied by GGP equity's current fair market value of $380mm, equity need only retain 5.5% of the post-reorganization company to break even at today's stock price"

"We estimate Casino's LTM leverage ratio is 8.9x. Ideally, a company consolidating results of proportionally-owned companies has the debt spread out among the consolidated companies. That is not the case with Casino - there is a massive gap between what is owned, and what is owed."

"MDA has consistently produced poor free cash flow. From 2012-2017 average free cash flow was C$33m (US$30m). Leading up to the DigitalGlobe deal, it even reported bank overdrafts of cash. YTD 2018 overdrafts have continued, and debt is rising through credit facility borrowing."

"AMR acts as if its approaching being "debt-free" and now it’s time to reward shareholders with stock buybacks and a dividend policy. But wait a second, is the Company really debt-free, or has it forgotten about its obligations to other stakeholders beyond financial creditors?"

"LSPD has a focus on SMBs but its DSOs at 15 are significantly lower than comparable sized peers at 70+ and actually improved during peak COVID-19 whereas peer DSOs worsened. How is this possible? On the next slide, we show that allowance for bad debts was even increasing."

"We believe the optics and appearance of these events is an off-balance sheet engineering structure: DGC's losses and debt were kept off SGHC's financials through the 2021–2022 SPAC marketing period and first year of trading, even as SGHC guaranteed DGC's loan facilities."

"SMCI working capital stress is near all-time highs, some of which can be explained by the pandemic, supply chain challenges and having to carry more inventory. SMCI stopped highlighting its working capital measure (which includes cash and short-term debt) post pandemic."

"Members are asked to advise whether the proposal with effect from 15 October to issue and redeem Certificates of Indebtedness only against US dollars at a fixed rate sould be implemented, and whether such a step should be accompanied by the zero-rating of interest tax."

"Specifically the debt would have to be "in the ordinary course of business consistent with past practices". However, Forescout has never had to draw on its credit facility before as a public company, so the practice does not appear to be consistent with past practices."

"Avery is more expensive and levered than it appears. We believe Avery inflates Adjusted EBITDA and EPS with dubious restructuring add-backs. In addition, it obscures reporting of operating leases, which are also debt, and ignores pension and environmental liabilities."

"Versus the current outstanding offshore debt of $1.893 Billion, the “real” best case net asset value is around $92 million. Divided by the current number of shares outstanding – 245 million - that leaves a share value of approximately C$0.38 at current exchange rates."

"Generac stopped providing quarterly disclosure of its allowance for bad debts. We find it suspicious that there was no increase in the allowance throughout 2021, even after it made various small and speculative acquisitions exposing it to more residential customers."

"Potential obstacles to executing the restructuring plan might include: (1) tax-related constraints, (2) restrictions in existing bank or other debt agreements prohibiting the separation of the assets, or (3) restrictions in certain contractual agreements of TWX."

"According to Bloomberg, only 25.52% of these bonds are owned by institutional investors, implying the remaining 74.48% of this debt is owned by retail investors who are highly unlikely to understand the risk they are taking when investing in these securities."

"Because the JV transaction can generate such large cash proceeds, which significantly decreases Macy's current debt burden, the pro forma Macy's OpCo alone is worth more than Macy's current stock price, while Macy still owns 85% of the JV and its cash flows."

"It is this strategy, coupled with expanded trading, that has driven what we believe is essentially a modestly profitable (at a smaller scale) trading business to take on crushing debt levels and, in our opinion, destroy substantial amounts of investor funds."

"In this illustration, we assume the JV takes on initial leverage of 5.8x net debt / EBITDA, or $6.9 billion(1), which enables Macy’s to repay debt at the parent-level in order to achieve a target leverage ratio of 3.5x Adjusted Debt / EBITDAR at the OpCo."

"Allied recorded its $20 million debt investment in Startec Global Communications at cost throughout 2001 and even increased its investment in the company in June 2001 by an additional $15 million despite significant evidence that Startec was failing."

"Legacy expedited LTL operational and financial results have continued to worsen with balance sheet concerns intensifying, as evidenced by two amendments to the Company's credit agreements for the debt issued in conjunction with the Omni acquisition."

"Spruce Point believes that current market data services fail to account for significant cash liabilities tied to unpaid taxes, product recalls, and unfunded employee compensation plans. We believe debt is $3.4 billion more than data services report."

"After fully funding all major CapEx projects, pension liabilities and deal fees, Timken’s separated businesses have additional debt capacity of over $1B to reach average peer capital structures, providing an ample liquidity cushion for each business"

"Target’s board decided not to transfer credit risk in a credit card transaction, despite Pershing Square’s repeated requests. In 2008, Target’s credit card operating profits fell 65% predominantly due to increased credit risk and bad debt expense"

"We do not like the fact that insiders have been selling into share buybacks while the Company levers itself up with short-term debt to support those repurchases. It appears that the execs are levering up the business in part to enrich themselves."

"We note that the date of the debt acquisitions disclosed here (March 21, 2021) differs from the date provided in the holdcos' own filings (December 29, 2020), likely because the debt and equity purchases were a two-part, coordinated transaction."

"By factoring in the U.K. pension debt, we estimate Saputo's true Net Debt / EBITDA leverage to be 3.5x. Looked at another way, with over $4.5 billion in net debt, each manufacturing facility is indebted $68m and every employee by almost $240k."

"Bunge’s “Contractual Obligations” disclosure in the notes to the financial statements shows a troubling development that over the past four years, short-term debt and other commitments and obligations have been its fastest growing categories."

"Assuming a 19.9% IPO of TIP REIT at a 15% IPO discount, the IPO would generate roughly $5.1bn in gross proceeds. After frictional costs and expenses, IPO proceeds of $3.0bn will be paid to retire Target debt and $1.6bn will remain at TIP REIT"

"In our opinion, GFL is showing investors an inaccurate measure of its leverage. Per its own IPO Prospectus, its lenders evaluate it on a "Net Funded Debt" measure, and not "Total Gross Debt" as depicted in its recent earnings press release."

"This implies that each company received debt financing ranging from approximately $10 million to $60 million. The only problem is that these companies appear to be empty boxes that would never receive loans remotely approaching this range."

"The Transaction allows for meaningful debt paydown by 2011E of $7.8bn. Of this amount, $4.4bn comes from selling the remaining 53% interest in credit card receivables and $3.2bn from free cash flow after operating and investing activities"

"When combining this convertible preferred equity issuance with the previously completed convertible debt financing, in downside scenarios, the Board has now created $845 million in liabilities in exchange for raising unnecessary capital."

"With ~$11bn of debt maturities coming due by 2012, we note that Simon has meaningful liquidity risk. We believe that Simon’s current valuation reflects a downward adjustment for liquidity risk and the likelihood of future equity dilution"

"Adopt an improved equity compensation and incentive scheme based on clear and transparent KPIs that are disclosed to investors (e.g. ROE, ROIC, operating profit, operating profit margin, debt to EBITDA and/or total shareholder return)"

"We looked at 150 bankruptcies over the past decade to see if we could find any other examples of public companies entering bankruptcy with (i) positive cash flow before debt maturities and (ii) asset values in excess of liabilities."

"Spruce Point believes that FND has a hidden form of debt within its Supply Chain Finance program. We observed that it modified disclosure language to reference amounts owed to financial intermediaries from amounts due to suppliers."