Tutor Perini Falls After Investor Presentation

Tutor Perini Corp.’s stock price sunk more than 6.5 percent Thursday as the Sylmar-based construction company became the newest target of activist investor Carson Block. Block, chief investment officer for hedge fund Muddy Waters Capital in San Francisco, announced at the Sohn San Francisco Conference on Wednesday that he is short selling Tutor Perini (TPC) stock. Shorting is a way for traders to turn a profit when a stock’s price declines. The investor told portfolio managers and other investors at the conference that Tutor Perini has cash flow problems. In Block’s PowerPoint presentation to investors, emailed to the Business Journal from Muddy Waters’ public relations firm, Block cited several factors. Overall, he justified his short by criticizing Tutor as being unable to consistently make cash, questioned its predicted growth in earnings, alleged management lacks credibility and forecasted that the company’s liquidity could become challenged. The short seller’s targeting of Tutor made headlines. Tate Sullivan, an analyst who follows Tutor for New York’s Sidoti & Co. Inc., said investors reacted as they have in other cases where short sellers have attacked construction companies for their accounting procedures. “A short attack increases uncertainty and decreases confidence in the accounting,” Sullivan said. The analyst said that accounting procedures for the construction projects performed by Tutor and its colleagues are based on assumptions, but that they are typical for the industry. “Before you actually are getting paid for a project, you’re booking expected revenue of that project,” he added. Sullivan cited one case for context from 2014, in which stock short-seller Prescience Point Research Group announced it was short selling stocks of engineering and construction company Chicago Bridge & Iron Co., claiming “creative acquisition accounting to conceal losses” related to its prior-year acquisition of Shaw Group. Chicago’s stock fell 7 percent the following day and continued to slide for months afterwards. “This industry has consistently recently received short attacks because of accounting,” he added. A part of his presentation, Block included a disclaimer that it has a short position on Tutor’s stock and that it “will profit if the trading prices of subject company’s securities decline.” It also said the presentation is not investment advice. Tutor should address the criticisms and claims publicly, Sullivan said, and not with just a press release. “Tutor Perini should have a conference call and update how its receivable cash collection is going, and that would be very helpful,” he said. “If they don’t do that, people will just suspect that their cash collection effort is not going well.” Also, regulators should consider laws on investment firms criticizing companies if those claims mean a potential financial profit for those investment firms, Sullivan said. “If they have a short, they have a vested interest to come out publicly and slam a company,” he said. Whether Tutor’s stock could suffer in the long-term as a direct result from Block’s attack is “hard to say,” Sullivan said. Tutor Perini did not return a request for comment. Shares closed Thursday at $20.75, down $1.45 or 6.5 percent, on the New York Stock Exchange.