Andrew Left of Citron Research has a new target in his sights, and the company’s stock is tumbling.
This time around Left is going after The Chemours Company, a spinoff of DuPont.
Left thinks a class action lawsuit could bankrupt Chemours, which he says has too much debt and not enough on hand to fund its defence.
Chemours fell by almost 10% when the report dropped, before it began to climb back. As of 3:34 ET, the stock is down just 2.1% at $8.61 a share.
Chemours didn’t immediately reply to a request for comment.
Left’s allegation is that Chemours was spun off to protect DuPont from the litigation.
Left said that the firm has $20 million in assets on hand in order to fund a defence according to filings, but in his assessment that won’t be nearly enough. Here’s Left (emphasis added):
No one has an exact dollar figure yet on the extent of the liabilities of this debacle. While Chemours only accounts for $20 million of overhang on its balance sheet, most Wall Street analysts estimate the liability to fall more inline with the $500 million figure.
But we always hear the value $5 billion being thrown around by social activists like the “Keep Your Promises DuPont” campaign, which has pegged environmental costs just for Parkersburg WV at $1 billion. After speaking in depth with community activists, Citron believes that even $5 billion may be a low number…
Additionally, Left pointed to Chemours debt load of $4 billion, which is roughly 5.5x its earnings, much higher than other companies in its sector.
Left concluded that the firm is most likely to go bankrupt due to the mix of issues.
“Citron thinks the most likely scenario is that Chemours goes bankrupt within 18 months … just long enough for the new Dow/DuPont to split into three companies, and create separate entities that will all fight for indemnification from this financial toxic dumpsite of liabilities,” said the report.