Cigna earnings beat by $0.04, revenue topped estimates
Investing.com -- Shares of Solaris Energy Infrastructure (NYSE:SEI) plunged 16% today following a critical report from Morpheus Research, a short-selling firm with ties to Hindenburg Research. The report titled "How A Crumbling Texas Oilfield Services Company Gambled It All On A Convicted Felon And The World’s Richest Man" casts doubt on the viability of Solaris’s business model and management, particularly after its acquisition of Mobile Energy Rentals LLC (MER), now known as Solaris Power Solutions.
The report details a series of concerning revelations about Solaris’s recent business activities, including a focus on the company’s 196% stock surge since the acquisition of MER. This rise was largely attributed to market enthusiasm for Solaris’s new Power Solutions division and its anchor customer, Elon Musk’s xAI data centers. However, the report questions the sustainability of this growth, highlighting the checkered past of John Tuma, co-owner of MER, who was convicted of environmental crimes in 2012 and later linked to an $800 million turbine scandal.
Solaris’s financials have also come under scrutiny. The company reported five consecutive quarters of declining revenues from Q3 2022 to Q4 2023, with its share price falling to a multi-year low by January 2024. The acquisition of MER was presented as a turnaround plan, with Solaris projecting that the Power Solutions division would contribute approximately $425 million in adjusted EBITDA by 2027. However, the Morpheus Research report raises doubts about these projections, pointing out that MER had minimal operating history and was overly reliant on a single customer, xAI, for its earnings.
The report further alleges that Solaris’s turbines at xAI’s Memphis data center are operating without air permits, which may lead to operational shutdowns. Additionally, intense opposition from environmental groups and local communities has been mounting, with a Change.org petition garnering over 6,500 signatures against the use of gas turbines at xAI’s data centers.
Morpheus Research also criticizes Solaris for its optimistic EBITDA margin projections for the Power Solutions segment and for potentially employing accounting maneuvers to inflate short-term profitability. These include depreciating its gas turbines over an assumed useful life of 25 years, which contrasts with industry standards suggesting a much shorter lifespan.
Investors appear to be reacting to the report’s findings, which paint a picture of a company that may have overstretched itself by tying its fortunes to a controversial business deal and a management team with a questionable track record. Solaris Energy Infrastructure has yet to respond publicly to the allegations made in the Morpheus Research report.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.