UPDATE: Spruce Point Short WD-40 Co. (WDFC)

April 2, 2020 9:38 AM EDT

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(Updated - April 2, 2020 9:39 AM EDT)

Spruce Point short WD-40 Co. (NASDAQ: WDFC). The firm said WDFC faces 55% - 60% downside risk to approximately US$75 - $85 per share.

"Spruce Point believes that WD-40 is widely misunderstood and believed to be defensive, but in reality, is facing both long and short-term secular pressures. With the Company recently increasing and drawing down almost 100% of its credit facility, a size 1,500% larger than the previous recession in 2008-2009 (and despite its sales only growing 33% in the same period), we believe a hole in its balance sheet has been exposed. Our forensic review and channel checks indicate record bloated inventories, and increasing financial strain. We believe it will have to drastically reduce its optimistic 3-7% sales target and re-set investor expectations meaningfully lower. Trading near all-time highs and at an unprecedented 6x sales and 27x EBITDA, we believe shares are a horrible risk/reward. We see 55% - 60% downside risk ($75-$85 per share)."

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