Short seller Carson Block unveiled his latest short trade at the Sohn San Francisco Investment Conference Wednesday, a bet against a small cap construction contractor whose accounting he called "quite aggressive."
Block's short bet, Tutor Perini, is based in Los Angeles and run by Ronald Tutor, who at one time owned a stake in Miramax studios. The stock, which has a market value just above $1 billion, is up more than 30 percent this year to $22.20 a share through Wednesday.
"From our perspective nothing has fundamentally changed from this company since it was bouncing around at $15 a share," said Block, whose presentation centered around the company's accounting of so-called change orders.
He summed up his short thesis in one slide, which read:
- "Business that can't consistently generate cash."
- "Projected earnings growth highly questionable."
- "Lack of management credibility."
- "Liquidity could become challenged."
"We really question how much more runway the banks are willing to give Tutor Perini," added Block. "We think there is a real risk the banks pull their revolver...This is a business that has so little liquidity it doesn't really take much to push it over the edge."
Block is chief investment officer of activist investment firm Muddy Waters Capital. The investor made a name for himself uncovering fraud by Chinese-based companies over the last decade and has since applied his short selling research methods to U.S. companies. He announced bets against Bank of The Ozarks in May and St. Jude Medical in August.
The short seller got the biggest reaction from the crowd (mostly laughter) when he turned his sights to Chairman and CEO Tutor to end the presentation, noting that the executive has dumped large blocks of stock in recent years, sold his private airplane back to the company and has overseen the departure of four CFOs in 12 years.
"Ron Tutor pays himself very well," said the investor. "He gets a $5 million bonus for naming a successor. The funny thing is that he hasn't named a successor and has still collected about 75 percent of that bonus."
Messages left with Tutor Perini's main office and investor relations were not immediately returned.