Investment Research report

WSP Global

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WSP Global
Poorly Engineered Financials
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WSP Global
Update: Poorly Engineered Financials
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Research Overview

S&P 500
Apr 3, 2024

After conducting a forensic financial review of WSP Global, a Montreal-based engineering and professional services firm, Spruce Point believes WSP is experiencing growing financial and business strains that are being masked by aggressive and non-standard financial reporting, accounting and reduced transparency. Based on our investigation, we estimate a 25% to 50% downside risk, or approximately C$110.00 -$165.00 per share.

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

  • WSP appears to be under greater financial and business stress than is evident by its increasingly opaque financial reporting
  • Cash flow and earnings quality appear to be embellished by aggressive and problematic accounting revisions
  • WSP’s Board leaders and Audit Committee appear in need of fresh oversight, with new members independent of management and the clubby Montreal business community
  • WSP shares present a poor risk/reward while trading at an unwarranted premium to peers

On April 10, 2024 we released an update with new information we have obtained since our original report. Regarding the tax evasion allegations in India, analysts have downplayed them as immaterial because India is inconsequential in size to the organization. We completely disagree. We have sourced the whistleblower documents and provide evidence that the matter was at the attention of the Board and WSP's top executives. In fact, we observe that within two months of receiving the email, WSP's Chief Legal Officer resigned, and within a year the CFO left.

Also, on the day we issued our original report, WSP filed its Management Information Circular (MIC), which uncovered new evidence that strengthened our opinion that WSP is experiencing financial pressures and reporting anomalies. We take a close look at WSP's Louis Berger Services divestiture and find evidence of revenue and margin anomalies that are difficult to explain.

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