Tempus AI hammered by short seller’s report
The short seller warned that the shares could drop 60%, spotlighting what it described as “aggressive accounting, financial reporting, and suspicious revenue-generating partnerships.”
Tempus AI, a healthcare data and diagnostics company that’s recently piqued the interest of retail traders, plunged Wednesday after bearish hedge fund Spruce Point Capital unloaded a searing report on the company, warning that it sees a “50% - 60% potential long-term downside and market underperformance risk.”
Spruce Point wrote:
“We believe the Tempus equity growth story is built on hype and appeal to retail investors that it is an exciting and disruptive technology play with AI appeal which could have the next Tesla or Nvidia-type inflection.
Rather, we think investors should focus on its aggressive accounting, financial engineering, related party dealings, and earnings quality.”
Tempus AI responded:
“We do not intend to respond to a report that is riddled with hypotheticals and inaccuracies and fails to address Tempus’ history of strong financial performance and impressive growth. We remain focused on delivering shareholder value, taking advantage of the enormous opportunity of bringing AI to healthcare, and helping patients live longer and healthier lives.”
Tempus AI emerged earlier this year in a list of the top 100 holdings among Robinhood investors, after ETF manager Cathie Wood — who has her own following among individual traders — began building a position in the stock. As of Tuesday’s close, the shares of the company, which has reported fast revenue growth but remains unprofitable, were up 95% for the year.
Spruce Point’s report criticized the company’s CEO, Eric Lefkofsky, saying he “is surrounded by a group of loyalists with a record of disappointing public investors at prior ventures such as Starbelly.com / HA-LO Industries (bankruptcy), Groupon (restatement), and InnerWorkings (restatement). We believe history may repeat and that Tempus investors are likely to be disappointed by a combination of aspirational goals that fail to materialize. In the past, Lefkofsky and partners positioned their companies to be the next Dell and Costco. Today, they talk about Tempus having technology leadership and upcoming inflection points like Nvidia or Tesla.”
It also noted that “Tempus insiders have not waited long since the IPO in April 2024 to start selling stock. In fact, each of the top 5% stockholders have recently sold shares.”
Coincidentally, we spoke with Lefkofsky on Tuesday for an interview, and asked him about the recent string of recent stock sales, including sales of some $190 million in shares in February by entities controlled in part by Lefkofsky.
“I’m a limited partner in a fund,” he said. “And that fund had to sell its stock because it doesn’t hold public company stocks. So, part of that was attributed to me.”
Other stock sales, he said, were related to tax withholding requirements.
“I intend to be a very long-term shareholder and a very slow seller as I have in other places,” Lefkofsky said.
