Representative Ro Khanna (D-CA) wrote a letter to the inspector general of the Department of Defence, requesting that he look into TransDigm Group, a controversial
aeroplane-part manufacturer and supplier of companies like Boeing.
The stock is down over 6% on the news.
Khanna’s letter accuses the company of “waste, fraud and abuse in the defence and industrial base.” He called the company a “hidden monopolist” that engages in “unreasonable” pricing increases.
On Wall Street, short sellers have been circling TransDigm for months alleging the same thing. Then in January, Citron Research accused the company of growing through debt-fuelled acquisitions and eye-popping price increases, which it passes along to the government.
“TransDigm’s business model is to aerospace as Valeant was to the pharmaceutical industry,” Left wrote. “TransDigm acquires aeroplane parts companies (over 50 in total), fires employees, and egregiously raises prices. This business model has made them a dominant supplier of aeroplane parts to the aerospace industry while burdening its balance sheet with sky-high debt load: in fact, 6.5x EBITDA leverage.”
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