Prescience Point Capital Management Issues Negative Update on Kellogg Company (NYSE: K) - Maintains Strong Sell Rating and Short Position

BATON ROUGE, La., Nov. 19, 2018 /PRNewswire/ --

• In our Initiation Report, published on April 26, 2018, we predicted that Kellogg would be forced to (1) reduce guidance and (2) cut its dividend or lose its credit rating.  On 10/31/18, part one of our thesis was proven correct when K slashed its FY'2018 adjusted EBIT and earnings growth guidance. Part two continues to play out.
• Kellogg's explanations for the guidance reduction suggest it is not being forthright with investors. Prescience Point's analysis indicates the reversal of years of extended DSOs will wreak havoc on FY'2019 sales and profitability.
• Multiple executive departures - most recently its Chief Accounting Officer - immediately preceding poor results and a plunge in the stock price is highly concerning and heightens our conviction.
• Prescience Point's research shows that even under optimistic assumptions, Kellogg's free cash flow is barely sufficient to cover its dividend and other short term obligations. We believe Kellogg's reduction in share repurchases and recently announced intention to sell off assets is being done out of necessity and in anticipation of significant cash flow deterioration; shoring up liquidity and buying the company more time in terms of its ability to fund its dividend.
• Prescience Point believes Kellogg's efforts are too little to late and urges management to be transparent with investors.

Prescience Point Capital Management ("Prescience Point"), a private investment manager that focuses on investigations of public companies, published a negative follow-up report today supporting its short position on Kellogg Company (NYSE: K), a multinational manufacturer and marketer of ready-to-eat cereals and convenience foods, which include Froot Loops, Pop-Tarts, Pringles and Rice Krispies.

After an in-depth investigation into Kellogg's business, which included forensic analysis of the company's financial statements and interviews with former employees, industry experts, and Kellogg management, Prescience Point believes that Kellogg's shares could fall by 35% from current levels. According to our report, Kellogg's management misjudged the structural decline in demand for sugary snacks and breakfast cereal as cyclical, and turned to aggressive accounting and massive cost cuts – short-sighted actions that we believe are likely to result in enormous problems in the future. Such actions are only temporary stopgaps, as the company faces headwinds in 2018 and beyond.

Prescience Point believes Kellogg will be forced to cut its dividend or risk being downgraded by the major credit ratings agencies.

"Unfortunately for shareholders, Kellogg appears to be misdirecting and is taking actions that will in effect result in even less transparency," said Eiad Asbahi, Founder and Portfolio Manager of Prescience Point. "We believe Kellogg's guidance reduction is just the tip of the iceberg, as the reversal of stuffed channels and extended DSOs will continue to wreak havoc on revenue growth expectations."   

Click here to download Prescience Point's full update report on Kellogg.

Prescience Point has a short position in the Kellogg Company and stands to benefit if its share price falls.

About Prescience Point Capital Management

Prescience Point Capital Management is a private investment manager that employs forensic investigative techniques to unearth significant mispricings in global markets. The firm specializes in extensive investigations of difficult-to-analyze public companies in order to uncover significant elements of the business that have been overlooked or ignored by others. Their publicly-available research focuses on exposing corporate wrongdoing and has been followed by resignations of auditors, CEOs and CFOs, earnings restatements, SEC investigations and stock delistings.

Prescience Point manages private funds on behalf of clients and principals and takes positions both long and short in support of their research. The firm invests across a broad set of equities that they believe have abnormally large disparities between what their underlying businesses are intrinsically worth and what their securities sell for.

The firm was founded by investor Eiad Asbahi in 2009 and is headquartered in Baton Rouge, LA. Prescience Point Capital Management is a registered investment advisor with the State of Louisiana and a member of the Financial Industry Regulatory Authority, CRD number 152721.

SOURCE Prescience Point Capital Management