What Happened?

Shares of aircraft leasing company FTAI Aviation (NASDAQ:FTAI) fell 28.3% in the morning session after the company released additional information following Muddy Waters's short report (published last week). 

FTAI said in an SEC filing that it "strongly disagrees with the assertions made in the Short-Seller Report. However, in view of the timing of the Short-Seller Report relative to the preparation of the Company's audited financial statements for fiscal year 2024, and the potential time required for any review of this nature, the Company cannot rule out the possibility that the filing of Company's Annual Report on Form 10-K for fiscal year 2024 (the "Annual Report") may be delayed." 

This was not the response that investors and the market were hoping for. A delayed filing raises concerns that there could be some credence in Muddy Waters's claims that FTAI has engaged in misleading accounting practices to make its businesses look better. Specifically, Muddy Waters claims that the company is overstating the portion of its business that comes from MRO (maintenance, repair, overhaul), which is steady and high margin. Instead, claims the short seller, there are more engine sales, which tend to be non-recurring and more cyclical in nature.

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What The Market Is Telling Us

FTAI Aviation’s shares are very volatile and have had 25 moves greater than 5% over the last year. But moves this big are rare even for FTAI Aviation and indicate this news significantly impacted the market’s perception of the business. 

The previous big move we wrote about was 4 days ago when the stock gained 5.4% on the news that the stock continued to recover from the Muddy Waters report. FTAI added in its response to the report, "...believes that the recent report by Muddy Waters is an attempt to profit at the expense of FTAI's shareholders by manipulating the company's stock price. We strongly disagree with the assertions made by this notorious short-seller, several of which are sourced to a single, anonymous individual who is described only as 'a former FTAI executive' and whose agenda is not explained."

FTAI Aviation is down 42.1% since the beginning of the year, and at $83.70 per share, it is trading 52.2% below its 52-week high of $174.96 from November 2024. Investors who bought $1,000 worth of FTAI Aviation’s shares 5 years ago would now be looking at an investment worth $4,382.

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