A short-seller report gave investors plenty to worry about with NuScale Power (SMR -8.99%) stock on Thursday. On the back of that document, which criticized the nuclear reactor maker harshly at times, the company's share price fell at double-digit rates. It ended the day nearly 12% lower, while the gloomy S&P 500 index only sank by 0.9%.
A short seller vented on NuScale
That morning, a firm called Iceberg Research published that NuScale Power report. This came not long after NuScale announced earlier this month that it had signed a contract to build a pair of its reactors for a U.S. company called Standard Power.
Iceberg poured freezing cold water on this arrangement, describing the deal as having no chance of being completed. In its view, Standard Power does not have the means to fulfill contracts of such size; it also said that Standard Power's managing director, Adam Swickle, was found guilty of securities fraud some time ago.
While NuScale has what Iceberg describes as a "more credible contract" with Utah Associated Municipal Power Systems, the short seller does not feel that NuScale has a good chance of completing it.
According to Iceberg's analysis, NuScale has only 15 months or so left of cash to finance its operations -- quite a narrow window for a dramatic turnaround in fortunes.
Accusations of low-value equity
Iceberg doesn't see a good way out with NuScale. It wrote in conclusion that "The company is struggling and we believe its equity has little to no value without government support."
"Even if that support continues, the DOE's usual policy is that costs have to be shared with the private sector, meaning that existing shareholders will be diluted," the short seller added.
NuScale has not yet publicly responded to the report.
