What: Shares of Tower Semiconductor (NASDAQ:TSEM) fell 9.9% Thursday after a scathingly bearish report from short-selling firm Spruce Point Capital.

So what: Spruce Point Capital's report is extensive, outlining its concerns in more than 70 pages. Among its most-unsettling accusations are that, in late 2013, Tower Semiconductor perpetuated a "brazen accounting scheme to forestall" the threat of bankruptcy, specifically by falsely inflating the value of assets in a joint venture with Panasonic "to inflate its stock, and convert its Series F debt to equity to relieve its debt burden."

"Furthermore," Spruce Point asserts, "Tower has engaged in other questionable accounting maneuvers to give the appearance of strong non-GAAP gross margins, profitability, and free cash flow [...]."

As a result, several law firms today announced class-action lawsuits promising to investigate possible violations of Federal securities laws on behalf of Tower Semiconductor investors.

Now what: Spruce Point Capital's report seems strangely sensationalized throughout, beginning with an obviously edited image dramatically depicting a tower being demolished with explosives. But a quick glance at its past reports -- one of which incidentally compelled me to step out in defense of iRobot's long-term business approach in mid-2014 -- indicates this is often the case, with volumes of one-sided commentary, and claims of accounting flaws used to justify a bearish stance.

At the same time, these particular claims against Tower Semiconductor's alleged accounting scheme appear more serious in nature than most, and I won't be the least bit surprised if the company responds to defend itself in the coming days. For now, while it remains to be seen whether Spruce Point's allegations have merit, it's hard to blame investors for taking a step back today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.