What happened

Maxar Technologies (NYSE:MAXR) -- the pride of Canada's space industry -- reported a big quarterly earnings beat in the second quarter. That didn't save its stock from falling 14% in the week after earnings were released, however.

It's also not saving the stock from the effects of a short attack launched just this morning, which is driving Maxar down another 13% as of 11 a.m. EDT.

Satellite beaming transmission to Earth

Image source: Getty Images.

So what

This morning, NYC-based short-seller and avid Twitter-er Spruce Point Capital tweeted  a "strong sell opinion" on Maxar Technologies stock, accusing the company of "brazen intangible asset accounting." Maxar earned $100 million in GAAP profits on $1.6 billion in revenue last year -- but Spruce Point Capital argues the stock is worth precisely nothing, and is going to $0 in the long term.

As Spruce Point explained, Maxar's "organic" sales are down nearly 13% so far this year, and satellite imaging prices are falling (which will continue to hurt revenue). Meanwhile, debt levels are high and could rise some more as Maxar invests ">$300m per year" in space hardware.

Now what

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.

Now, that's not to say I think Maxar stock is a buy. Fact is, Spruce Point is dead on with its observation that Maxar is carrying too much debt -- $3.2 billion net of cash, which is more than the company's own market cap. At a debt-adjusted market cap of 58 times annual last year's earnings (which are in fact declining this year), I agree that the stock is overpriced and should not be bought.

I simply don't agree that Maxar is going to zero.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.