UFP Technologies Inc. - UFPT

Earnings drama surrounds my sleepy little medtech play

Rookie mistake was my first thought. Bold, perhaps, but likely a mistake.

UFPT was set to announce earnings the following morning, and the chances that they were going to announce a major miss due to a supposed 28% decline in shipments to a 25% customer seemed highly unlikely; a miss of that magnitude would likely entail an earlier preannouncement, something the company’s CPA of a CEO would certainly know. Besides, expectations for Q1 were already pretty tempered, which is why the shares were down close to 30% since their last earnings release.

Anyways, that scenario is roughly what the folks over at Wolfpack Research claimed when they issued a report early Monday morning on shares of UFPT and announced to the world that they were short. They also took to Twitter (X) in an apparent attempt to goad the company into offering some sort of a reaction, but the company decided not to play along.

My second thought was why would an activist shop want to pick a fight with a sleepy little medtech outfit like UFPT? Typically the activist shops pick fights with companies they consider either fraudulent or overtly promotional, but UFPT doesn’t really fit into either of those molds. As I have been pointing out for the past year, the UFPT story is primarily (at least from my take) about a company with a flailing growth curve and turning to the use of acquisitions in an attempt to keep the momentum going. A tried and true strategy by many failing companies, but one that most find tough to properly execute. Fairly simple.

Over the years my names have become the target, knowingly or not, for pretty much every short activist investor out there, which is one of the reasons I think investors should pay attention to the ideas I point out since they have a habit of being co-opted by activist organizations (for better or worse) in the future.

If you take a look at the Wolfpack report list, for example, out of their 9 most recent published reports, subscribers to Short Ideas would have read about 5 of those names (3 more if you go back even further) first right here: UFPT, MAX, INOD, APLD, and GSHD were all highlighted right here (for better or worse) first and sometimes long before anyone else picked up on them. Is that an advantage? It can be, especially when considering things like borrowing costs and rates, but knowledge has its own rewards as well.

As subscribers know, I don’t pick loud fights with companies or make bombastic claims that may or may not prove to be true; I’ve been party to litigation in the past and don’t wish for a repeat. I call things the way that I see them, and let subscribers decide for themselves whether or not the information I share is worthwhile enough to support. I don’t take positions in any of the names I write about so subscribers know there is no hidden agenda, and they should know that I am basically working just for them and not for anyone else.

For what it’s worth, my ideal name tends to be a sleepy name (like UFPT); one that doesn’t garner much discussion or interest as the fundamentals continue to falter and the stock price fades along with it. As an example, shares of DMRC recently declined from $43 to $11 inside of 3 months as the fundamentals withered and with nary a harsh word coming from anyone else nor even a rise in the short interest. I won’t argue that there aren’t times when an activist’s involvement can hasten that decline, but it’s never something I actively promote or solicit, and no story in my mind at least should be dependent upon that type of coverage.

Now, some of my thoughts on those UFPT quarterly results…