Spruce Point calls for investigation into Resideo’s financial reporting

Spruce Point Capital said in a research note that after conducting a forensic financial review of Resideo Technologies (REZI), the firm is calling for an independent investigation into the accuracy of its financial reporting and accounting. “As a troubled spin-off from Honeywell (HON) in 2018, we provide evidence that it has failed to achieve its long-term financial goals, suffers from years of organizational complexity, and has failed to fix lingering technology issues.” The firm also says its analysis suggests Resideo has engaged in “value-destructive” M&A with “questionable: financial reporting to bolster the appearance of earnings growth. “We find the the Company’s acquisitions of First Alert and Snap One Holdings in 2022 and 2024, respectively, to be particularly troubled,” Spruce Point says. “Based on our sum-of-the-parts analysis, we believe the share price to be materially overvalued and see 25% – 50% downside risk (to approximately $17.64 – $26.45 per share) and expect shares to underperform the market and its related industries.”