Activist hedge fund accuses condom-maker of inflating financials

September 9, 2019 | Hedge Funds
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Meanwhile, Ben Axler of Spruce Point says Church & Dwight rigged numbers to jack up compensation bonuses

Church & Dwight is the listed maker of Trojan condoms, sex toys, hair growth, and rectal creams. It also sells baking soda and products relating to laundry, cat litter, oral and personal care.

Hedge fund alleges “financial engineering”

Activist hedge fund and short-seller Spruce Point warned investors that the firm’s stock could lose up to 50% of its value.

Ben Axler, the founder of the hedge fund, alleged that six out of the company’s ten power brands were “struggling or outright failures.”

Last year, the firm paid a 15% bonus to employees and management. According to Axler, this bonus was a “complete charade.”

Axler said the firm experienced “collapsing margins, failed deals, subtle accounting changes, and numbers that don’t add up.”

Meanwhile, Axler said Matt Farrell, the company’s CEO, remained preoccupied with “financial engineering” rather than the company’s growth.

Spruce Point’s short-selling record

Further, it is not clear whether Spruce Point is short on the company’s stock.

However, last year, the fund was the second-most successful short-seller and activist, according to Activist Insight.

“We believe management is hyper promotional, potentially deceptive and highly aggressive at inflating the financials to maximize its self-interested compensation objectives,” the hedge fund said in its 92-page report.

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