Resideo Technologies saw its stock slide 3.5% on Tuesday following an announcement from Spruce Point Capital Management that the investment firm has established a short position in the company. Spruce Point released a detailed report that urged an independent review of Resideo's financial statements, citing concerns about the accuracy of financial reporting and the company's accounting practices.
The report contends that Resideo has not met its long-term financial targets since spinning off from Honeywell in 2018. Spruce Point characterized the company’s deal-making as "value-destructive M&A with questionable financial reporting," arguing that certain acquisitions have been used to convey an appearance of earnings progress rather than reflecting sustainable improvements.
Two acquisitions were singled out in the report as "particularly troubled": the purchase of First Alert in 2022 and the acquisition of Snap One Holdings in 2024. According to Spruce Point, those deals are emblematic of a broader pattern that masks underlying weaknesses in Resideo’s core operations.
Spruce Point also criticized Resideo's recent plan to split up its business, labeling that move a "red herring" that will not resolve what the firm described as fundamental problems. The short-seller identified those core problems as weakening competitive position, diminished growth avenues, and mounting accounting pressures.
On leverage, the report noted a material increase in Resideo’s leverage ratio, which the short-seller said has risen to 5.5x from 3.3x in 2018. Spruce Point acknowledged that Resideo has a scheduled settlement of obligations to Honeywell planned for July 2025, but still flagged the higher leverage as a concern.
Using a sum-of-the-parts approach, Spruce Point estimated that Resideo shares could face downside of roughly 25% to 50%, translating to a target price range of about $17.64 to $26.45 per share. The report further raised alarms over organizational complexity, the company's failure to reach long-term goals, and what Spruce Point described as cash flow issues that are obscured by non-GAAP financial measures.
Observers and market participants will likely monitor Resideo’s response to the short-seller’s allegations and any follow-up actions, including calls for independent scrutiny of its reporting. For now, Spruce Point’s public short position and detailed critique have translated into immediate downward pressure on the company’s stock price.