Investment Research report

Xylem Inc.

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Xylem Inc.
A Leak in the Bull Case
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Research Overview

S&P 500
Aug 9, 2023

After conducting a forensic financial review of Xylem (NYSE: XYL), a designer, manufacturer and service provider for the water and wastewater industry, Spruce Point highlights that there are multiple potential problems spurring from the recent Evoqua acquisition - including red flags missed prior to the acquisition and potential revenue dis-synergies coming out of it. Based on our investigation, we estimate a 30% to 45% downside risk, or $58 -$74 per share.

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

  • We have found evidence that, prior to the acquisition of Evoqua, Xylem was struggling to meet its long-term goals as pressures were increasing
  • We believe Xylem’s liquidity is strained and there is no near-term path to accretive value creation
  • We believe investors should be alarmed that Evoqua was recently charged with revenue accounting fraud by the SEC and remains under federal investigation
  • We have concerns about recent governance changes in the period leading up to and post-closing of Evoqua
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