Caesarstone Drops as Short Seller Spruce Point Targets Stock

  • Short seller says company hiding rise in raw material costs
  • Caesarstone shares have nearly quadrupled since March 2012 IPO

Shares of Caesarstone Sdot Yam Ltd., the maker of quartz countertops, tumbled as much as 17 percent after short-seller Spruce Point Capital Management said the company is overvalued as it has been downplaying pricing pressures and a jump in raw material costs.

Caesarstone fell 7.1 percent to $44.61 on Wednesday in New York, extending a 37 percent decline since it lowered its 2015 sales forecast on an Aug. 5 earnings call. Shares of the Sdot-Yam, Israel-based company could be worth as little as $11, a discount of about 75 percent, Spruce Point said in a report published Wednesday on its website.

Caesarstone’s margins “may be significantly overstated,” Spruce Point said. The investment firm also said the company’s countertops contain less actual quartz than advertised and are below industry standards, a threat to its marketing strategy as a “premium” option in home remodeling.

Caesarstone’s lower sales forecast was “a canary in the coal mine,” the analysts wrote. “Caesarstone is at continued risk of missing goals.”

The stock pared losses after a Caesarstone spokesman said the company is comfortable with its financial statements.

“We stand by all of our previous public statements, regulatory filings and presentations. We believe in Caesarstone’s business and its opportunities,” the company said in an e-mailed response to Bloomberg News.

Short sellers increased bets against Caesarstone to a record 2.9 percent of shares outstanding on Aug. 17, compared with 0.1 percent a year ago, according to data compiled by Markit, a London-based research firm.

Caesarstone shares have nearly quadrupled since its initial public offering in March 2012. They plunged 26 percent on Aug. 5, when the company lowered its 2015 revenue forecast on slower-than-expected sales growth in the U.S., wiping out this year’s gains.

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