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(Bloomberg) — CSG NV fell the most since its January listing after a short-seller report questioned the defense industry supplier’s business model.
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The Czech company’s shares slumped as much as 21% after Hunterbrook Capital’s media arm published a report, saying the investment firm had built up a short position in CSG. It also said it’s “long a basket of comparable securities at the time of publication.”
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Hunterbrook said it had done a months-long investigation of how much ammunition the group “really produces,” according to a social media post. Bloomberg has reached out to CSG for comment.
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Controlled by Czech billionaire Michal Strnad, CSG had a market valuation of €18.4 billion ($21.6 billion) before Monday’s drop. The company makes makes road vehicles, air traffic control systems as well as ammunition. After an initial advance following the IPO, the stock fell below the €25 offer price for the first time in late March, and has now extended that decline to almost 40%. On Monday, it fell to a low of €14.48.
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“CSG was pitched as the next Rheinmetall but looks a lot more like a sophisticated ammunition trading house,” Jens-Peter Rieck at Mwb Research said following Hunterbrook’s publication. “It was too expensive from day one, both because of cycle risk and because the underlying business model didn’t hold up under scrutiny.”
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Most analysts remain positive on the shares. Nine out of 12 tracked by Bloomberg have a buy or equivalent recommendation, with none rating it sell.
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Last year, Hunterbrook Media issued a report on Viscofan SA, a Spanish maker of sausage-casings, that alleged workplace safety violations at the firm’s factory in Illinois. Viscofan denied the report and its stock has subsequently rallied to trade above where it was before the report was published.
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Game service Roblox and nuclear-reactor builder Nano Nuclear Energy are among other companies that have previously been targeted by Hunterbrook.
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—With assistance from Jonas Ekblom and Blaise Robinson.
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(Updates with shares, analyst comment starting in second paragraph.)
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