After a nice price run-up this week, Transmedics is down over 14% today, apparently due to a short report by Scorpion Capital.
Investing.com – Short seller Scorpion Capital disclosed a short position in TransMedics Group Inc (NASDAQ:TMDX) accusing the organ transplant tech. company of fraudulent practices, including kickbacks, billing fraud, and unreported device failures.
Scorpion alleged the company operates a “mafia-style” scheme involving off-label device misuse and customer attrition, as it set TransMedics target price of $0.
“Investors sense something is afoot, after a spate of recent bad news : a Q3 miss and startling drop in sequential revenue; the CFO fired a month later, after a 10-year tenure; a disastrous Dec investor day and 2025 guide – back half weighted, naturally,” report said.
Q3 miss and startling drop in sequential revenue - I feel the miss hasn’t been fully explained and is still a bit of a mystery, but I’m confident in Waleed’s leadership here.
The CFO fired a month later, after a 10-year tenure - He wasn’t fired, he was promoted to a more strategic role . Pure fiction.
A disastrous Dec investor day and 2025 guide – back half weighted, naturally - The investor day was incredibly informative and the back half weighting was fully explained.
If TMDX wasn’t already a top holding I’d be adding more shares. I may nibble a bit.
Members of the management team will present at the upcoming 43(rd) Annual J.P. Morgan Healthcare Conference. The presentation will take place on Monday, January 13, 2025, at 2:15 p.m. Pacific Standard Time / 5:15 p.m. Eastern Standard Time.
I trimmed some shares the other day at 80 bucks, happy to buy a chunk back at around 61-62. It is one of my largest holdings as well. The short report is pretty pathetic, they are saving lives and $$. Failure rate is 3% vs 30% for traditional organ care method.
Gerardo Hernandez will be succeeding Stephen Gordon, who will remain with the company as a non-executive employee until March 31, 2025, to ensure a seamless transition.
Sounds temporary and non-strategic, but I don’t follow TMDX.
It was covered during the Piper Sandler Healthcare Conference that he would be involved in educating and lobbying national stakeholders, which is key to the next round of growth.
Also found this, indicating he’ll be on board until 2026 at least.
Mr. Gordon will remain a non-executive employee of the Company until March 31, 2025, before serving as a non-employee senior advisor to the Company focusing on national transplant stakeholder engagement until March 31, 2026.
So the report of Stephen Gorden being fired appears made up.
The whole report is a bit over the top. It’s like they discovered a new mafia with Waleed as mob boss.
I am not familiar with this circumstance and don’t follow TMDX (and hate incendiary short reports as much as the next guy), but I’d agree with Smorgasbord1’s assessment of the follow-on role. That they are paying him as an external consultant for a year after leaving the company smells like a ‘if you play nice we’ll pay you’ type of arrangement.
I am no longer following Transmedics and I don’t like shorts or short reports, but I have to say that I agree with Smorg and Leosource. The CFO wasn’t promoted, he is gone.
They kept him as a “non-executive” helper of the transition for several months (until March of this year), and then as a “non-employee” advisor for a year.
Sorry, but there is no way you can see that as a “promotion”.
I wouldn’t call it a demotion or promotion. It’s a different role. In addition, they probably see another CFO (who has experience doing this previously) taking Transmedics a step further. Here is what the CEO said on the Piper Sandler conference about it.
Speaker 1: So lots of information yesterday to process. Let’s just go ahead and start there. On the CFO transition, it was a little surprising. So just maybe talk about the timing of the CFO transition and why now and what’s kind of next for that role?
Waleed: Sure. Matt, thank you for the invitation. There’s never a good timing for these types of transitions. Why now? We find ourselves in a situation where we have sort of finished the 1st wave of growth for TransMedics and we’re preparing for the next wave of growth, which I personally believe would be potentially bigger than the 1st wave.
And we wanted to take this opportunity to bring in a fresh set of eyes to build on
what Steven has developed and prepare TransMedics for the next wave of growth, focusing on not just growing the top line, but also maximizing efficiency and profitability of the business and putting that infrastructure to help us manage that next wave of growth even in a more efficient way going forward. That’s where Gerardo is going to be tasked to do. Also, our business today is significantly more complex than where we started this. Pareto brings in expertise and financial leadership experience from a very complex businesses that we’re growing rapidly and fast. So we’re looking forward to his contribution.
Stephen, his depth of knowledge of TransMedics business and his ability to articulate the value of TransMedics and NOP and OCS is critical. And we are going to work together on our strategic initiatives of educating the national stakeholdership in organ transplant in Washington, D. C, and we need that I need that bandwidth. And there’s only 3 members of our team that could do that. It’s myself, Steven and Tamar.
So we want Tamar to focus on the growth. Steven and I will focus on national
stakeholder outreach for 2025 and beyond. Long transition period, I’m fortunate to have 2 consummate professionals. Stephen will be with the company until the end of March to make sure the case filed, the end year close is done. After that, he’s going to transition into strategic consultant working with me on the national initiatives and Gerardo will be leading the finance organization going forward.
Again, I have no horse in this race (and don’t want to continue beating a dead one), but the idea that the previous CFO is moving into a mission-critical role at the same time as becoming a non-employee doesn’t pass the sniff test. If it’s that important of a role that only 3 people on earth can perform, why would he be leaving the company he’s been at 10 years to do it?
Can only speculate on reasons for that and a surprise/immediate change in the c-suite, but generally land on not-so-good ones given the information provided.
One legit reason to becoming a contractor would be to join forces with other companies. Big boys like GE or Lockheed can finance their own lobbyists. Smaller companies often pool their capital together to lobby more effectively.
I appreciate everyone’s comments and agree with the points made about Stephen Gordon. The manner of his departure is at least a bit suspicious.
However, the short report concerns me more. It’s extremely long so I’ve only been able to scan it.
There’s a lot in there that could be just fluff. In my mind, the biggest allegations are that the largest Transplant Centers will be dropping participation in the NOP in 2025. Maybe this has already been happening and that is the reasoning revenue has stalled.
I’ve reduced my holding by more than 50% as I wait for further developments.
TMDX responded to the short report this morning - see below. They also gave a presentation at the JP Morgan healthcare conference, which I haven’t had the opportunity to listen to yet. Stock is up 7% AH.
There is zero evidence that the largest transplant centers are leaving NOP, not sure why anyone would randomly choose to believe that from the laughable report, which didn’t seem to have any basis in reality.
TMDX brings a lot of value to the table and has executed to a very high level over the past 4 years. The slowdown has been concerning but things look like they are turning around, and the selloff has been way overdone. From the Q&A today, CEO confirmed Q4 will beat in the ballpark of at least $10M. I’m hoping we get a nice raise to the FY25 guide during the earnings call. Shorts will get crushed, and we’ll see a nice run up.
Short reports are effective because it’s very hard to prove one way or another if their accusations are legit. It largely comes down to whether you trust the company or the shorts. I have been following the company for over 4 years, and I do trust Waleed. (Not 100% - because I don’t trust any business leader 100%) With that said, I still would not be surprised if the stock goes lower in the short term until they prove the shorts wrong with business results. That could be in the next ER, or it could take several more quarters. The way I am looking at it is - do I think the TMDX business is sound and will the stock be higher in 2 years? I think it will be. I am not looking at it as a swing trade or a bet on current momentum. It’s a long term investment.
I added 50% more shares near the end of Dec. at around $64. Did not catch the low, but I’m content. If it goes significantly lower, I would probably buy some more.
It is currently less than a 1% position for me - but I own many stocks and most of them are less than 2% positions. Top holdings are TSLA 5%, TTD 3%, NET 3%, SOFI 2.7%, and a basket of Bitcoin related stocks 3.9%. I’m also still about 33% cash.
Yeah, its nuts how this game works sometimes. In late 2023, I was starting to build my position in Elf just as a crazy short report came out accusing them of being in a sex cult. It ended up being a great opportunity to build my position. The stock more than doubled from the lows and I made a huge profit. Volatility is our friend if we have conviction and patience. Both are required to be successful in the long-run. I’m not an expert on how many of these short reports are actually legit. We need to fetter out the Enron’s of the world and a good company should not fear legitimate questioning. In the case of a lot of our growth stocks over the past few years, the short reports have been dubious, at best.