Flotek Industries stock plummets on short seller report

Flotek Industries (NYSE:FTK) shares fell 21% Monday after short seller Wolfpack Research announced a short position, claiming the company’s $400 million deal has been canceled.

Wolfpack Research stated the contract with PREPA and Power Expectations has been terminated, which the firm estimates represents 57% of Flotek’s near-term backlog. The short seller said the cancellation stems from an allegedly unauthorized signature that has been referred for criminal investigation.

According to Wolfpack’s report, on August 7th, days after Flotek announced the $400 million deal, a federal regulator sent a letter alleging that Enchanted Rock, LLC, one of the original signatories, did not authorize the signature. The regulator reportedly only approved the deal because of Enchanted Rock’s involvement.

The short seller questioned why Flotek has not disclosed the deal’s cancellation to investors, noting the news has been covered in Spanish-language media in Puerto Rico but has not appeared on major financial news platforms. Wolfpack stated that while Flotek may be a victim in the situation, investors who have not been informed about the matter are also being affected.

The report also raised concerns about Power Expectations, Flotek’s primary partner in the deal, noting the company reportedly had $17 million in revenues before being awarded the contract. The federal regulator stated the proposal "did not provide adequate evidence of organizational or financial capacity to sustain performance."

Flotek announced the $400 million contract during its recent earnings call. The company has not yet publicly addressed Wolfpack Research’s claims or the reported cancellation of the deal.