Investment Research report

Essential Utilities, Inc.

NYSE:
WTRG
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Research Overview

INDEX:
S&P 500
Sector:
Utilities
Position:
Short
Date:
Mar 8, 2023

After conducting a forensic financial and accounting review, Spruce Point believes Essential Utilities, Inc. (NYSE: WTRG), an aggressively managed roll-up of water, wastewater and natural gas assets, has grave issues regarding the efficacy of its business model, the accuracy of its financial reporting, and its ability to meet financial obligations and targets. Based on our investigation, we estimate 35% to 50% downside risk, or $20.00-$28.00 per share.

The report highlights several key concerns with the company, including:

  • It appears that WTRG is an aggressive roll-up hitting a wall that draws public outrage
  • Evidence shows that the recent $4.3 billion levered acquisition of Peoples was a defensive deal and is struggling
  • Multiple signs that WTRG is experiencing rising financial stress and potential asset impairments are looming
  • We believe the Company’s dividend policy is problematic as payments are effectively made from external capital sources
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