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Aug 16, 2016

S3 BLACKLIGHT: Spruce Point Shorting Aecom’s “Overly-Engineered Earnings”

Global engineering and construction firm Aecom’s (ACM US) stock price is down 4% today, to $33.59, after Spruce Point Capital Management issued a negative investment research report looking for a 33% - 45% drop in ACM’s stock price.

In 2014 URS Corp (URS US) sold itself to ACM for $5 billion citing synergies, exposure in size to the oil and gas markets and added exposure to the mining and industrial sectors. After reporting quarterly results last week ACM’s management filed an amended 10-K/A stating: “our internal control over financial reporting was ineffective as of September 30, 2015, due to the existence of a material weakness. Management discovered deficiencies associated with the acquisition of URS Corporation related to (a) the alignment of accounting policies specific to forward loss reserves and (b) income tax accounts.”  Spruce Point further states that “The difference between AECOM’s forecasted deal costs and amortization vs. reality came in +37% and +44% above estimates.”

Spruce Point has disclosed that they are short ACM stock.

Aecom’s average short interest in 2014-2015 was $147 million and was trending downward in late 2015 and early 2016. Short interest hit a low of $111 million in mid-January 2016 but started to trend upward, and by the end of the 2nd quarter was back up to $143 million. Since the end of the 2nd quarter, Aecom’s short interest rose 21% to $172 million.

For more information on the above analysis, please contact:

Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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