Shares of OSI Systems, Inc. (NASDAQ: OSIS), a designer and manufacturer of specialized electronic systems for homeland security applications, are down more than 13% as of 11 a.m. EST, after Muddy Waters Capital noted it was shorting the company.
The short-seller sees OSI Systems as overly reliant on a single contract. “The major major contract these guys have is a turnkey contract in Mexico, and that’s up for renewal,” investor Carson Block said during an interview on Bloomberg TV. “The pricing on that appears to be egregious and a lot of investors don’t understand the economics of this.”
Not only did Muddy Waters Capital short the company but also called it “rotten to the core.” Investors should obviously take such strong comments from a short-seller with a grain of salt. However, if these allegations — Block accused OSI Systems of obtaining a separate contract through corruption — prove true, it would be brutal for the company’s stock price.
The main thing to watch will be the potential renewal contract with Mexico and whether its terms remain as favorable for OSI Systems as they are currently. Until the ink dries on that agreement, it’s simply speculation weighing on OSI Systems today.
10 stocks we like better than OSI Systems
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and OSI Systems wasn’t one of them! That’s right — they think these 10 stocks are even better buys.