Short Seller Issues Negative Alert On Axon Enterprises; Taser Maker Says It's 'Riddled With Inaccuracies'

Short seller Spruce Point Management released a report Wednesday ripping Axon Enterprise Inc AAXN and suggesting the Taser manufacturer is facing potential downside between 40% and 60%.

The Accusations

In addition to the Taser, Axon offers analytics services to law enforcement via officer body cams. Yet Spruce Point said Axon's business and stock present a number of problems.  

“With a history of SEC inquires, delinquent filings, and material weaknesses, we believe Axon will shock investors with significant earnings disappointment and increasing cash burn as it fails to scale beyond these niche businesses,” the short report said. 

Axon has a greater exposure to Chinese tariffs than the company has suggested, according to Spruce Point. The firm also said the Taser has limited domestic growth opportunities — and software and sensors growth is slowing.

The Taser's first-mover advantage since the launch of the Taser 60 program in 2014 is eroding, and Axon burned through a record amount of operating cash in the first quarter, the short seller said. 

“In addition, Axon has never disclosed errors or accounting issues tied to compensation expenses. However, Spruce Point has unearthed 401k plan filings at the IRS where Axon admits errors dating back to 2014." 

Axon Fires Back 

In an email to Benzinga, Axon fired back against the allegations in the report.

“Spruce Capital put out a poorly researched report that is riddled with inaccuracies and innuendos. While short sellers seek to spread fear, uncertainty and doubt in hopes of knocking our stock down to make a short-term profit, Axon is focused on long-term solutions such as making the bullet obsolete, improving police-community relations and enabling a fairer justice system,” an Axon spokesperson said.

So far, it seems like the market is skeptical of Spruce Point’s claims: Axon shares were trading higher by 3.67% at $68.46 at the time of publication Wednesday.

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