Rollins (NYSE:ROL) shares fell Wednesday after the stock became the focus point of short seller Spruce Point Capital's latest report.
The firm said it estimates a potential 30% to 40% downside risk to ROL, which would place its share price between $21.75 and $25.40 per share.
Spruce Point has concerns about the accuracy of ROL's financial statements and its competitive positioning in an industry undergoing fundamental change, they said in the report.
Rollins, which is one of the largest companies in the US pest control industry, "should already have investors on red alert and replete with skepticism given that it recently settled charges with the SEC for 'improper earnings management' and switched auditors," the short seller argues.
Furthermore, Spruce claims it has new evidence of broader accounting concerns that suggest Rollins has not learned its lesson.
"Follow the money, the Rollins family is using Rollins balance sheet to accelerate family stock sales and unloaded $1.5 billion at $35/share," they add, also commenting that debt is rising and "ROL's valuation bolsters the case to sell."