Shares of Vivint Solar (NYSE:VSLR) stock are getting hit hard again this morning, down 5.8% as of noon EDT. In fact, Vivint Solar stock has tumbled an astonishing 21% since the week began -- and now we finally know why.
In a short report just out this morning, short-seller "Marcus Aurelius Value" observes that "Vivint appears to have largely concealed a growing pattern of undisclosed lawsuits alleging the company has engaged in a nationwide fraud involving forged customer contracts."
Indeed, in an appendix to the report, Marcus Aurelius Value lists more than two dozen lawsuits filed against Vivint, alleging in general that "Vivint has forged the signatures of homeowners, complete strangers, relatives, neighbors, and even a dead person onto sham solar contracts."
Now, Marcus Aurelius doesn't actually come out and say that it believes the allegations in these lawsuits are true. The analyst only hints at this, noting that Vivint employees have "perverse incentives" to seek "quick cash" selling solar panels door to door, racking up commissions of anywhere from $2,500 to $7,000 per sale and "as much as $500k-$1 million" per year.
The analyst further implies that because "Vivint has missed revenue estimates in four of the last five quarters," management may have an incentive of its own "to look the other way and dismiss these numerous complaints and to overtly or tacitly encourage their sales agents to hide important sales details from consumers, forge and falsify authorization documents."
But Marcus Aurelius Value studiously avoids saying the allegations are true.
What it does seem to believe, though, is that even the taint of the allegations has the power to create "substantial downside potential" in the stock -- if not from damages ordered after successful lawsuits, then perhaps from sales lost as consumers begin to shy away from the company.
Investors who took encouragement from the short-seller's refraining from saying the renewable energy company actually did anything wrong, helping the shares to recover some of their losses from earlier in the day, might want to ponder the implications of just having a negative cloud of suspicion linger over Vivint stock.