PowerSchool Holdings, Inc. (PWSC) stock plunged as much as 11% Wednesday after Spruce Point Capital said it is short the company, seeing a potential 30% to 60% downside risk.
Short seller Spruce Point said it has concerns about the company's "aggressive accounting practices, unsustainable growth expectations, and sales of a product that may potentially be violating several states’ child privacy laws."
The firm wrote, "We also believe the Board may be conflicted and, as a result, may not be serving all shareholders equally."
There are also claims that the strong growth the company experienced leading up to, and immediately after, its IPO "was the result of unsustainable levels of K-12 spending brought on by COVID-19."
Other worries that Spruce Point has about the company include a potential class action lawsuit, potentially overstated revenue, restructuring costs, senior management changes and PWSC's valuation.