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Spruce Point hits Stryker and by the tape TSO3

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The New York-based firm Spruce Point Capital published a negative research report on Wednesday on a Michigan company that is hurting a local company in the process. The report targets Stryker, an American medical technology giant that bought the Quebec company TSO3 three years ago.

In its report, Spruce Point notably denounces Stryker’s executive compensation policy, questions the company’s accounting practices, its level of indebtedness, and maintains that it has paid too much to make acquisitions over the years. years.

Spruce Point Capital points out that the acquisition of TSO3specializing in the sterilization of medical equipment, is the trigger that led the firm to consider the acquisitions made by Stryker.

We were puzzled that Stryker would pay anything to acquire TSO’s product line.3.

Excerpt from the report of the New York firm Spruce Point Capital

In 2017, Spruce Point Capital published a tough research report on TSO3. Ben Axler maintained at the time that the technology was not at the level of that of the competition and that the sales of TSO3 remained “weak”. He added that investors underestimated the risk that TSO3 would never turn a profit or that its marketing partnership with Getinge would end, which it did eventually.

Stryker bought TSO3 for more than US$50 million, which is more than the sales generated by TSO3 for 10 years, and suffered financial losses, Spruce Point said in its report on Stryker. In a rare comment about TSO3 a year later, Stryker’s CEO said the company was having trouble developing the product, writes Spruce Point.


Led by activist investor and short-selling specialist Ben Axler, Spruce Point Capital has targeted several Quebec companies for the past five years. In addition to TSO3, companies Nuvei, Lightspeed and Dollarama all received a negative report.

Spruce Point believes that the valuation multiple of Stryker, a company well known to the general public for its beds in many hospitals, deserves to be compressed and that the stock could lose up to 70% of its value. Spruce Point claims that Stryker’s margins are under more pressure than the company indicates and that management is slow to streamline its operations.

When asked to respond to Spruce Point Capital’s report, a Stryker spokesperson said simply that the company continues to execute on its strategic plan to accelerate growth and generate long-term value while demonstrating transparency with investors and the financial community.

“We value discussions with our shareholders and their views, and we are open to constructive discussions with other stakeholders,” the spokesperson said by email.

After initially slipping in early trading on Wednesday, Stryker’s stock rebounded in the afternoon to close flat at US$268.20 on the New York Stock Exchange. If the title remains unchanged from the level it was at the beginning of the year, it is up approximately 5% for a year.



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