MDC Partners Refutes Short Seller’s Claims in Q1 Earnings Call

By Patrick Coffee Comment

Last week, the value of holding company MDC Partners stock dropped after activist short-seller Daniel Yu and his Gotham City released a report claiming that the company has “understated debts” and that its accounting practices are “highly disturbing” nearly a year after the resignation of CEO Miles Nadal amid various reports of financial improprieties.

The move was designed to depress the company’s stock prices ahead of yesterday’s earnings call, but MDC’s new chairman and CEO Scott Kaufman strongly disputed Yu’s claims during the call.

He opened by saying, “I’m as confident as ever in MDC Partners and our long-term competitive advantage.” Here’s the full press release for the call, during which Kaufman said Yu’s report was “filled with inaccuracies” and that the issues it raised had “long been addressed in a clear and transparent manner,” as per Campaign’s coverage today.

Kaufman also specifically defended the decision to hire CP+B CEO Lori Senecal’s husband Bill Grogan, stating:

“The fact that they’re married to one another in no way diminishes the fact that they are each highly acclaimed global executives, who have been in the network for many years.”

In a MediaPost story that ran after Yu dropped his report on Monday, analyst Richard Tullo also questioned its reliability, stating: “We think the media did not properly vet reports on Friday and was used by the blogger who is good at social media.” Here’s the most interesting part of that post:

“The report stated that MDC paid senior leader Lori Senecal’s husband some $1 million for 5 months’ work. Tullo’s group spoke with MDC and was told that William Grogan has actually been with MDC for five years.”

It’s true that Grogan has worked for various MDC agencies since 2010, but Yu’s report seemed to specifically reference his time spent as global president of brands for the larger holding company.

MDC reported an overall loss of $23.3 million for Q1, but the results beat Wall Street expectations according to CNBC. The company’s stock price has recovered after hitting a low point just before noon today but has dropped by more than $5 since last week.