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Investment research company Muddy Waters released a short report on Hannon Armstrong (NYSE:HASI) Tuesday, which saw the company’s stock tumble by more than 19%.
In the report, Muddy Waters said HASI’s “accounting is so complex and misleading that its financial statements are effectively meaningless.”
HASI rejected the claims in a lengthy statement on Wednesday, telling investors while they “will not engage in a tit for tat rebuttal of every falsehood in the report, it is important to set the record straight.”
In addition, analysts at B.Riley, Oppenheimer, Morgan Stanley, and JPMorgan have pushed back on the claims made in the report:
In a note to investors, B.Riley analyst Christopher Souther said that while they “agree that Hannon’s financials are complex,” they disagree with the misleading contention. “We emphasize that management’s explanations around its use of HLBV accounting has been very consistent historically in describing the variable timing of GAAP results and cash receipts, how tax equity partner economics will influence them both in the short-term, and the fact that they tend to converge over a project’s lifetime to drive the non-GAAP distributable earnings results,” said Souther.
He added that they would use the sell-off as a buying opportunity, as “HASI remains a top pick given its defensive positioning amid high volatility in the space, with strong potential upside over the next 2-3 years.” Souther lowered the firm’s price target on the stock from $67 to $55 based on multiple compression across the sector.
Oppenheimer analyst Noah Kaye reiterated an Outperform rating on the stock and said the firm is “incremental buyers of HASI” following the share price decline with the Muddy Waters report exploiting “industry-standard GAAP accounting treatment of renewable energy projects to generate inaccurate and misleading conclusions.”
“We view HASI’s culture, business model, operating history and leadership on ESG reporting as antithetical to the report’s conclusions,” said Kaye.
Morgan Stanley analyst Stephen Byrd was less forceful in his rebuttal of the report, stating: “Based on a preliminary review of the short seller report on HASI, we disagree with a few fundamental points raised given the underlying economics, and cash flows, of the company’s business. That said, we continue to assess the arguments raised.”
JPMorgan analyst Mark Strouse also acknowledged that HASI’s financial reports are “complex” but said, “many of the assertions raised in the report are driven by timing differences of GAAP accounting and cash recognition stemming from tax equity partnerships, and we do not believe the report provides a smoking gun to characterize the company’s financial statements as misleading.”
HASI shares have climbed 3.28% Thursday.
