OSIS Stock – Shares Downgraded From a Buy to Hold Rating


On January 8, 2018, Registrar Journal reported that “Zacks Investment Research downgraded shares of OSI Systems . . . from a buy rating to a hold rating in a report issued on Thursday morning.”

On January 9, 2018, The Lincolnian Online reported that “BidaskClub upgraded shares of OSI Systems . . . from a strong sell rating to a sell rating in a research report released on Saturday.”

The Lincolnian Online also reported that “Zacks Investment Research lowered shares of OSI Systems from a buy rating to a hold rating in a report on Wednesday, November 1st.”

OSIS Stock – OSI Systems, Inc. Securities Class Action Investigation

Kehoe Law Firm, P.C. continues to investigate whether OSI Systems, Inc. violated the securities laws or breached its fiduciary duties to shareholders.  As previously reported, a securities class action lawsuit was filed on behalf of individuals or entities that purchased OSI Systems, Inc. securities between August 16, 2013 and December 6, 2017, inclusive (the “Class Period”).

The OSIS class action complaint alleges that throughout the Class Period, OSIS Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about OSI Systems’ business, operations, and prospects.

Specifically, OSI Systems Defendants allegedly failed to disclose that: (1) OSI Systems acquired the Albania concession through bribery or other illicit means; (2) OSI transferred 49% of its project company associated with the Albania concession, S2 Albania SHPK, an entity purportedly worth millions, for consideration of less than $5.00; (3) OSI engaged in other illegal acts, including improper sales and cash payments to government officials; (4) these practices caused OSI Systems to be vulnerable to potential civil and criminal liability, and adverse regulatory action; and (5) as a result, OSI Systems Defendants’ statements about OSI’s business, operations, and prospects, were materially false and/or misleading and/or lacked a reasonable basis.

On December 6, 2017, Muddy Waters Research published a report on OSI entitled “OSIS: Rotten to the Core.” In the report, Muddy Waters Research alleges that there was corruption in the 2013 award of OSI’s Albania concession. Muddy Waters Research claims that while the concession “has an estimated top line lifetime value of $150 million to $250 million,” OSI “likely bribed somebody by giving half of it away for $4.50.” Further, Muddy Waters Research reported that “[t]here was an unannounced transfer of 49% of OSIS’s project company, S2 Albania SHPK, to a holding company owned by an Albanian doctor, for consideration of less than $5.00.”

Additionally, Muddy Waters Research reported that “[t]o be clear, this company (S2 Albania SHPK) is the company to which all rights and obligations under the turnkey contract award belong, so 49% of the company is presumably worth many millions of dollars. It appears to [Muddy Waters Research] that [OSI’s] accounts do not reflect the transfer – there are no deductions for non-controlling interests in the income statement, and February 2017 bond offering documents appear to show the subsidiary as 100% owned by [OSI].”

Muddy Waters Research also reported that “[b]eyond the turnkey contracts, investigators’ interviews with former employees yielded numerous anecdotes indicating [OSI] is rotten to the core. Former employees alleged a list of rot they experienced at Rapiscan, including their concern about possibly going to prison, knowledge of improper sales, cash payments to government officials, fraud in a significant contract, and that [OSI] had narrowly avoided being debarred from doing business with the U.S. government.”

On this news, the OSIS stock price fell $24.55 per share, or 29.2%, to close at $59.52 per share on December 6, 2017, on unusually heavy trading volume.

December 6, 2017 OSIS Stock Price

Tumbling OSIS Stock Shares – Los Angeles Business Journal Reports

On December 7, 2017, the Los Angeles Business Journal reported (“Short Seller’s Bet Against OSI Systems Sent Stock Price Tumbling”) that “. . . OSI Systems Inc. saw its shares tumble more than 30 percent . . . following a short seller’s declaration that the company was “rotten to the core.” The story also reported that

Carson Block, founder and chief investment officer of hedge fund Muddy Waters Capital in San Francisco alleged on Bloomberg TV that he had, “smoking-gun proof that, when this company got a turn-key contract a few years ago in Albania, worth $150-$250 million top line, that they paid a bribe or kickback of almost half of that concession. To me, this is damning evidence.” The Muddy Waters website states that it’s likely OSI’s accounts are misstated as a result.

Block cited former OSI employees as sources for his claim, according to the hedge fund’s website. He said he was short selling the company. Shorting is a way for traders to turn a profit when a stock’s price declines.

Muddy Waters also estimates that 50 to 55 percent of OSI’s EBITDA comes from one contract in Mexico that is up for renewal in 2018.

OSI Systems, Inc.

According to OSIS’ Form 10-K for the fiscal year ended June 30, 2017:

OSI Systems, Inc., together with [its] subsidiaries, is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications. [OSIS] sell[s] [its] products and provide[s] related services in diversified markets, including homeland security, healthcare, defense and aerospace. [The] company was originally incorporated in 1987 in California. In March 2010, [OSIS] reincorporated . . . in the State of Delaware. [OSIS’] principal office is located at 12525 Chadron Avenue, Hawthorne, California 90250.

[OSIS has] three operating divisions: (a) Security, providing security and inspection systems, turnkey security screening solutions and related services; (b) Healthcare, providing patient monitoring, diagnostic cardiology, and anesthesia delivery and ventilation systems; and (c) Optoelectronics and Manufacturing, providing specialized electronic components and electronic manufacturing services for the Security and Healthcare divisions, as well as to external original equipment manufacturer . . . customers and end users for applications in the defense, aerospace, medical and industrial markets, among others.

OSIS Securities Holders (NASDAQ:OSIS)

If you purchased or otherwise acquired OSIS stock and wish to discuss your potential legal rights or claims, please contact John Kehoe, Esq., (215) 792-6676, Ext. 801, [email protected] or e-mail [email protected].

Kehoe Law Firm, P.C.