Citron Research's Andrew Left has a new short target and he says some of the company's practices are the "definition of evil."
Left announced his short position Thursday on Chemours (CC) on Twitter. The company emerged last June as a result of DuPont (DD) spinning off its performance chemicals business. Shares of the company are up 65% this year and are priced around $9; however, the company has a long way to go before it reaches its high of $22.25, which was achieved on the day of its initial public offering.
Left argued in his report that Chemours was "set up for bankruptcy" and that the purpose of the spinoff was for DuPont to "rid itself of the black hole of environmental liabilities that will drag down the company for years if not decades to come."
"I feel almost guilty making the stock market commentary when it's a much bigger issue than that," Left said in an interview with Real Money.
The liabilities Chemours could face are tied to cases brought against DuPont in which plaintiffs say they developed cancer and other diseases from PFOA, a chemical used in the production of Teflon, which was found in the drinking water near DuPont's plants in West Virginia. As part of the terms of the spinoff, Chemours agreed to indemnify DuPont for payments resulting from the cases.
"There's real people here," Left said.
Chemours said in a statement released Thursday that it "strongly refutes" claims made in Citron Research's report. The company also said it has taken "swift and decisive action" to strengthen its liquidity position. Representatives from Citron did not immediately respond to requests to comment on the ongoing litigation and environmental concerns raised in Left's report.
The extent of the liabilities resulting from PFOA-related claims is unknown, but Wall Street analysts place the figure around $500 million, Left wrote. In its first-quarter filing with the Securities and Exchange Commission, Chemours said that as of March 31, there were approximately 3,500 lawsuits filed in various federal and state courts in Ohio and West Virginia and that "the majority of the lawsuits allege personal injury claims associated with high cholesterol and thyroid disease from exposure to PFOA in drinking water." In the same filing, the company said it, "through DuPont, denies the allegations in these lawsuits and is defending itself vigorously."
Left also raised questions about the company fighting the mounting claims against it. Once "you fight them and you don't give these people any money at all, it's just evil," Left said.