Please ensure Javascript is enabled for purposes of website accessibility
Small-Cap Confidential
Undiscovered stocks that can make you rich

November 15, 2022

Treace Medical (TMCI) Under Fire from Short Seller

Shares of Treace Medical (TMCI) have sold off this morning following the publishing of a short report from Culper Research. The link is here. The report goes into detail regarding reimbursement codes and sales tactics that try to get “complexity adjustments” that will end up generating more revenue. They also call into question the benefits of Lapiplasty versus other methods for dealing with bunions. Quotes from podiatrists and a former Treace sales rep are included, though no names. As is typical with short reports, there is a lot of detail that may or may not be accurate and it would take far too long to try and debunk it all. This report will raise eyebrows and scrutiny on TMCI and I expect we’ll hear from management, as well as analysts that cover the stock at Morgan Stanley, JP Morgan Chase and more, in the near future. The vast majority of the time these events are absorbed by the stock and no fraud or major issues are uncovered. That said, occasionally unsavory things are revealed, and the stocks continue to suffer. I suspect TMCI’s situation will fall into the first category (it will recover just fine) but I’m not going to advise doubling down into uncertainty. I’ve had TMCI at BUY HALF as we build our initial position. Today, I’m moving to hold until we learn more and see how the stock behaves in light of this report. I’ll continue to provide updates as we learn more. HOLD

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.