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Citron Research calls TransDigm 'Valeant of the aerospace industry,' shares plummet

SLS
Source: Boeing

Shares of TransDigm shed as much as 13 percent Friday after Andrew Left's Citron Research released a report accusing it of price gouging.

Citron compared the TransDigm's business model to that of Valeant Pharmaceuticals, which the firm previously called the "pharmaceutical Enron." Citron said TransDigm "acquires airplane parts companies (over 50 in total), fires employees, and egregiously raises prices." Citron's executive editor, Left, is an activist short seller.

Valeant came under fire when The New York Times reported in 2015 that the Canadian pharmaceutical company was being investigated for alleged involvement in a scheme to sustain sales of high-priced drugs and prevent patients and insurers from switching to cheaper generic drugs.

TransDigm did not immediately respond to CNBC requests for comment. Its stock recovered some of the losses by midafternoon, trading down about 9 percent.

President Donald Trump now holds the same sway over the aerospace industry that Hillary Clinton once did for the pharmaceutical industry, Citron noted. As president-elect, Trump took down shares of Boeing and Lockheed Martin when he tweeted about the costs of Air Force One and the F-35 programs.

Citron alleged that TransDigm is the cause for the high cost of replacing airplane parts.

"President Trump: Do you know when your 757 plane 'Air Trump' is down for a day and you wondered why a replacement air filter, valve, pump or coffee maker cost $20,000? The reason was TransDigm," Citron said in its report.

Citron, which has not disclosed whether it has a position in TransDigm, valued the stock at $166, implying a downside of more than 34 percent from its Thursday close of $251.76. With Friday's declines, TransDigm shares have fallen about 15 percent in the past six months.

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