"This is a deeply misleading report from a self-interested short seller that we vigorously dispute," Vivint told TheStreet in a statement Monday after Marcus Aurelius Value sent the stock plunging Friday with a research note titled "VSLR: Fiddler on the Roof."
The short-seller report alleged that Vivint "appears to have largely concealed a growing pattern of undisclosed lawsuits alleging the company has engaged in a nationwide fraud involving forged customer contracts."
The note sent Vivint shares plunging by as much as 12% Friday to as low as $5.86, although they later partly recovered to finish the day at $6.55, down 2% on the day. However, the stock dropped as much as 7% more on Monday morning to $6.08, but rebounded to close at $6.54, off 0.2%. Vivint shares have fallen by about a third from their 52-week high of $9.82 set in early August, although they've gained 71.6% year to date.
In a statement provided to TheStreet, a Vivint spokeswoman said that "Marcus Aurelius Value is wrong about Vivint Solar," adding:
"We interact with more than a million consumers each year through our direct-to-home sales model, and are proud of the solar energy solutions that we provide and our commitment to our customers. As a consumer-facing business, from time to time we receive complaints or are involved in consumer disputes. We take allegations of wrongdoing, no matter how small, seriously and thoroughly investigate all allegations. We do not tolerate fraud or deception, and strive to resolve complaints to the customer's satisfaction.
We maintain robust internal compliance systems and continually educate our employees and contractors on compliance with our legal and regulatory obligations, as well as how to conduct business in accordance with our policies and values. In collaboration with our regulators, we continuously review and improve our training and procedures. As a public company, we are subject to numerous reporting and disclosure obligations. This includes an obligation to disclose all material risks that we face. We stand behind the accuracy and adequacy of our disclosures. We remain focused on serving the needs of our customers and executing on our strategy to be the premier provider of distributed solar energy."
In a note on Monday, Roth Capital Partners analyst Philip Shen said his firm believes the claims in the short-seller report are "overblown" and recommends investors buy shares.
"We believe Aurelius's claims are a biased short attack that will turn out to be bunk," the analyst wrote while reiterating his buy recommendation and $12 price target. "The authors believe that the company has been using deceptive tactics to 'mask weakness in the underlying business' ... Our work suggests the complete opposite. Not only are U.S. [residential] solar fundamentals strong and likely to surprise to the upside, but VSLR -- we learned in our SPI meetings last week -- is also executing well."
Citigroup analyst Praful Mehta also described the selling as "overdone" in a note on Monday and said the "28 forgery and other fraud cases in the Aurelius report represent a very small fraction of VSLR's sales."
The analyst said the company has noted some customer complaints in its 10K form filed with the U.S. Securities and Exchange Commission and "believes the legal reserves it has taken are adequate." Mehta has a buy recommendation and $11 target price on Vivint.
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