(Bloomberg) — PowerSchool Holdings Inc. shares notched their largest one-day drop in eight months after Spruce Point Capital Management LLC said it’s betting against the company as it sees significant downside for the stock.
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Shares of the education technology company fell 9.8% Wednesday to close at $17.79 in its biggest one-day drop since August 2023, after the short report was released. That extended year-to-date losses to nearly 25%. The Folsom, California-based company currently has a market value of about $3.6 billion.
“We expect the Company’s share price to underperform the broader education and technology industries,” Spruce Point said in the report on Wednesday. It estimates a 30% to 60% downside drop to its share price from Tuesday’s close.
PowerSchool did not respond to a Bloomberg News request for comment.
Meanwhile, Wall Street has 12 buy ratings and an average analyst price target of about $28, according to data compiled by Bloomberg, implying nearly 60% upside from where shares currently trade.
“We believe this represents a huge premium for a business with significant leverage, aggressive accounting practices, customers facing a major fiscal cliff, and potential legal and regulatory issues,” said Spruce Point, adding that it thinks the company should be valued at $8 to $14 a share.
Trading volume for PowerSchool spiked to more than 20 times the 20-day average on Wednesday following the short report. Among its top shareholders are private equity firms Vista Equity Partners Management LLC and Onex Corp.
PowerSchool is set to report its first-quarter earnings after market close on May 7.
(Updates stock move at market close.)
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