Maxar Under Attack by Short Seller Specialist Spruce Point Capital

MDA to become Maxar Technologies. Credit: MDA/SpaceQ.

There are many ways to make money through the stock market. One avenue is to short sell a stock. Spruce Point Capital is a specialist in short selling, and its latest victim is Maxar Technologies.

Investopia defines short selling as follows; “Short selling is the sale of a security that is not owned by the seller or that the seller has borrowed. Short selling is motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit. Short selling may be prompted by speculation, or by the desire to hedge the downside risk of a long position in the same security or a related one. Since the risk of loss on a short sale is theoretically infinite, short selling should only be used by experienced traders, who are familiar with the risks.”

Short selling is not uncommon, it’s done all the time. However, many who short sell don’t boast or directly attack the company they are short selling. Not so with Spruce Point Capital. In fact, once they find a company that’s of particular interest to them, they go on the offensive and circulate a speculative and damming report about the particular company. It’s a strategy that works. By attacking a stock in such a way which forces the price down, Spruce Point Capital benefits if they get the price down far enough. Maxar was down 13% this past Tuesday when the report and social media barrage began.

Here’s an example of one of their speculative tweets;


To read through their report is to read a doomsday scenario for Maxar. In fact, Spruce Point Capital in its report tries to lay out the case “For Maxar Being Worthless”.

Jumping on the news was Michael Byers who isn’t a fan of Maxar’s expansion into the U.S. and tweeted “Canadian space company MDA expanded massively into the US, incorporated there, renamed itself and then listed on the New York Stock Exchange. It might now be in trouble. A lesson learned for Canadian companies chasing US military contracts?”


Byers in his tweet was referencing an article in the Globe and Mail by David Milstead.

Milstead writes “much of Spruce Point’s analysis is based on skepticism about Maxar’s business and how the company’s 2018 guidance is already below the numbers presented in documents related to the DigitalGlobe merger. While Maxar boosters say there’s a growing need for satellite imagery, Spruce Point believes customers will find cheaper, alternative solutions from companies such as Airbus SE and Planet Labs Inc., whose products’ image resolutions, while not as good as DigitalGlobe’s, are satisfactory for most private-sector satellite-photography needs.”

While competition in the satellite imagery business is rising, Maxar’s DigitalGlobe has been a solid players for years. Companies like Planet may be nipping at their heels, but aren’t in the same league or even the same market for some products.

The Motley Fool’s Rich Smith also chimed in on this topic saying “So is Maxar doomed? I don’t buy it. For one thing, not all of Spruce Point’s numbers add up. The analyst says, for example, that Maxar is only generating between $0 and $50 million in positive free cash flow. But according to data from S&P Global Market Intelligence, trailing free cash flow is actually at $226 million. Even deducting the purchases of ‘intangible assets’ that so upset Spruce Point, and which amounted to $123 million over the past year, still leaves Maxar generating more than $100 million — and more than twice the amount of cash the short-seller says the company is making.”

In the U.S. neither Bloomberg, CNBC or TheStreet reported on the short report. BNN Bloomberg in Canada did have a caller segment where someone asked about it, but the analyst had little of substance to say as she didn’t have enough knowledge about the company.

For it’s part Maxar issued the following statement;

The report on Maxar Technologies Ltd. (“Maxar” or the “Company”, formerly MacDonald, Dettwiler and Associates Ltd.) (NYSE and TSX: MAXR) released today by Spruce Point Capital Management contains a number of inaccurate claims and misleading statements.Maxar believes it is a direct attempt by a short-seller to profit, at the expense of Maxar shareholders, by manipulating Maxar’s stock price.

Maxar continues to execute against its strategy, and recently reaffirmed its full year 2018 guidance for revenue and cash flow from operations, while increasing its full-year adjusted EPS outlook. Maxar believes that the Company remains positioned for future growth. Management and the Board of Directors are focused on delivering enhanced value for all Maxar shareholders.

Maxar continues to be fully committed to transparency in all of its investor presentations and financial reports. Please refer to the Company’s disclosure materials filed with Canadian and U.S. securities regulatory authorities, which are available online under the Company’s SEDAR profile at , under the Company’s EDGAR profile at or on the Company’s website at, for more information.

A point made in the Spruce Point Capital about Maxar holding a large amount of debt is true. Thomson Reuters notes that the industry average of Debt to Capital for Communications Equipment, which it places Maxar in, is 42.34%. Maxar’s Debt to Capital is currently 60.07%. Maxar’s debit is something the company regularly discusses in its analyst calls. In their most recent quarterly results they noted that their debt leverage ratio was 4.1, below the covenant restrictions of 5.5.

Maxar’s stock is covered by 11 investment analysts and currently has nine analysts saying it’s a buy, one as a hold and one as a strong buy. The stock was up over 7% today with the market seemingly supporting the company again.

Coincidentally the Prime Minister was visiting MDA’s Montreal facility today getting a tour including and seeing the $1B RADARSAT Constellation Mission satellites before they are shipped to SpaceX for a fall launch.

Maxar 5 day stock chart
Maxar 5 day stock chart. Credit: Google.

About Marc Boucher

Boucher is an entrepreneur, writer, editor & publisher. He is the founder of SpaceQ Media Inc. and CEO and co-founder of SpaceRef Interactive LLC. Boucher has 20+ years working in various roles in the space industry and a total of 30 years as a technology entrepreneur including creating Maple Square, Canada's first internet directory and search engine.

Leave a Reply