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PowerSchool Holdings, Inc

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Schooling Investors With Powerful Accounting
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Research Overview

S&P 500
Apr 17, 2024

After conducting a forensic financial review of PowerSchool Holdings, Inc., an educational technology provider for K-12 institutions, Spruce Point believes PowerSchool is experiencing ongoing headwinds due to issues with student privacy laws, financial strain from aggressive accounting tactics and depletion of federal funding. Based on our investigation, we estimate a 30% to 60% downside risk, or approximately $8.00 - $14.00 per share.

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

  • We believe PowerSchool is likely to come under pressure for contract renewals as K-12 districts stare down a fiscal cliff with the upcoming end of COVID-19 fiscal stimulus
  • PowerSchool’s Intersect product may potentially be operating in direct violation of several states’ student privacy laws, which prohibit building profiles and targeting ads to K-12 students
  • We believe PowerSchool’s financial reporting and aggressive accounting practices signal growing strain and that financial leverage is understated
  • Significant executive turnover post-IPO and questions over past conduct of management and board members
  • Private equity owners and management have shown a willingness to sell stock 25% below what promotional analysts claim the shares are worth and their large continued holdings may act as an overhang

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