What happened
Shares of Internet of Things (IoT) company Samsara (IOT 4.65%) had a rough week. According to data compiled by S&P Global Market Intelligence, its shares lost nearly 18% of their value over the period, and it was due largely to a scathing report on its operations by a short-seller.
So what
That short-seller, Spruce Point Capital, published a research report on Wednesday that was sharply critical of Samsara. It claimed the company uses improper accounting practices, and said it has enjoyed little success in the high-potential IoT sphere.
Spruce Point said that Samsara has pushed into only a few segments of that market, namely the electronic logging devices (ELDs) that help track driver activity in truck fleets, auto safety cameras, and GPS trackers. Outside of these rather limited areas, the short-seller said, Samsara hasn't yet gained "meaningful traction."
It added that Samsara sells such offerings as bundled subscription products, which allowed the company to lift annual recurring revenue (ARR), a metric that can be important to investors in such businesses.
Spruce Point also leveled accusations of "opaque" financial reporting, saying that Samsara does not report basic operational metrics like number of subscribers or customer churn.
Now what
As of Friday evening, there was no official response from Samsara. But perhaps it should reply to Spruce Point's claims, because the short-seller's accusations are fairly extensive, seem well researched, and are damning. If Samsara maintains its silence, it might be best for investors to tread very carefully with the stock.
