Spruce Point issues ‘strong sell’ opinion on PowerSchool

Spruce Point has issued a strong sell opinion on Power School and says the shares face up to 30%-60% downside risk. The firm believes K-12 school districts across the U.S. are “staring down an impending fiscal cliff,” which will significantly pressure contract renewals for K-12 vendors such as PowerSchool. 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, Spruce Point argues, adding that it believes PowerSchool’s financial reporting and aggressive accounting practices signal growing strain and that financial leverage is understated. Spruce Point also has several concerns with PowerSchool’s management team and board.