Samsara Inc. (NYSE:IOT) shares are down around 3% on Thursday after Spruce Point Capital released a short report on the stock.
The short seller said that after taking an in-depth look into IOT's financial reporting and accounting practices, they estimate that it is "overstating gross and EBITDA margins by 664bps and 1,176bps, respectively."
The firm adds that it believed Samsara 's hardware exposure "has resulted in a uniquely poor business model relative to its SaaS peers, exposed the company to increasing risks tied to Chinese sourced wireless modules from Quectel that the FCC chair wants blacklisted, and enabled the adoption of aggressive accounting policies."
"Ironically, despite being a $15 billion market cap pure-play on IoT, Samsara is not even a top ten holding in the only thematic IoT ETF," argues Spruce Point.
The firm sees up to 45% to 75% downside risk to IOT's stock price, putting it between $6.30 and $13.90 per share.