U.S.-based Tempus AI(TEM) came under intense pressure after a scathing short seller report raised red flags about the company’s valuation, business model, and financial transparency. The bearish hedge fund Spruce Point Capital report compared TEM stock’s potential trajectory to tech names like Tesla (TSLA) and Nvidia (NVDA), warning investors of a looming “inflection point.”
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Tempus AI specializes in data-driven solutions for the healthcare industry with a focus on oncology and genomics.
TEM Stock Rattled by Explosive Short Seller Claims
The Spruce report warns of a potential 50% to 60% long-term downside for TEM stock and a high risk of market underperformance. The firm argued that Tempus’ growth story is largely driven by hype and retail investor enthusiasm, fueled by the company’s positioning as an exciting AI-driven tech disruptor. However, Spruce Point cautioned investors to look past the buzz, pointing instead to concerns over aggressive accounting practices, financial engineering, related-party transactions, and overall earnings quality.
The report also criticized the company’s billing practices, highlighting an aggressive use of billing code 81479, known for minimal oversight and a higher risk of misuse. According to the report, this approach could artificially boost revenue, potentially prioritizing financial gains over patient care. Additionally, the report raised concerns about Tempus AI’s leadership, pointing to CEO Eric Lefkofsky’s past involvement with companies that faced financial scandals, including bankruptcies and restatements.
Following these claims, TEM stock crashed over 19% on Wednesday. Still, despite the sharp drop, the stock remains up 58% year-to-date.
Tempus Rejects Short-Seller Claims
Tempus AI dismissed the short-seller allegations, calling the report “riddled with hypotheticals and inaccuracies” and failing to reflect the company’s solid track record of financial performance and growth.
Is Tempus a Good Stock to Buy?
There’s no denying the risks with Tempus AI. But Spruce Point’s report doesn’t introduce any new red flags; it simply amplifies existing concerns.
On TipRanks, TEM stock has received a Moderate Buy rating based on six Buy and three Hold recommendations. The Tempus AI share price forecast is $66.25, which implies an upside of 25% from the current level.
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