$183 million short-seller Spruce Point is targeting the maker of Trojan condoms and Arm & Hammer baking soda

lookcatalog via Flickr

Church & Dwight, the maker of Trojan Condoms, is under attack from short-seller Spruce Point.

• Spruce Point Capital issued a report saying it believes the stock price of Church & Dwight, the maker of Trojan condoms, Arm & Hammer baking soda, and several other consumer brands, is overvalued. Spruce Point has a short position in Church & Dwight, and benefits if the shares fall.
• The $270 million short-seller flagged the company's reliance on brick-and-mortar stores and declining sales in old and new brands, and said that it had paid too much for recent acquisitions.
• Other brands owned by Church & Dwight include hair removal cream Nair, cleaning material OxiClean, First Response pregnancy tests, and laundry detergent Xtra.
• Click here for more BI Prime stories.

A new report from short-seller Spruce Point Capital is targeting Church & Dwight, the maker of Trojan condoms.

Church & Dwight, which also owns Arm & Hammer baking soda, Nair hair removal cream, and pregnancy test kit First Response, has been active in M&A since CEO Matthew Farrell took over in 2016.

Acquisitions include a $1 billion deal for flossing technology Waterpik in 2017 - and Spruce Point called that a "significant" overpay. Spruce Point has taken a short position in Church & Dwight, and benefits if the shares fall.

Church & Dwight also inked an agreement this year to buy FLAWLESS, another hair removal company. That arrangement includes $475 million in cash plus an earn-out, meaning the total price tag could balloon to $900 million in 12 months if sales targets are hit, a statement announcing the deal said.

Church & Dwight did not immediately respond to requests for comment.

See more: A short seller says the company that sells wedding rings to much of America is overvalued, and he's betting that Amazon will steal its business

Spruce Point Capital, the $183 million short-seller run by Ben Axler, notched solid returns in 2018. The firm made 24% in a year when most hedge funds lost money.

Spruce Point's new report argued that Church & Dwight's stock price is 35% to 50% higher than where it should be. The company, according to the short-seller report, is too reliant on brick-and-mortar stores to sell its core products, many of which have been declining in sales - like Trojan condoms, OxiClean, and Xtra laundry detergent.

Of the 11 long-term brands that Church & Dwight has acquired since 2001, only Arm & Hammer and dry shampoo-maker Batiste are considering to be trending up, according to Spruce Point.

Spruce Point said that it believes shares of the company could fall to roughly $40-$52. Shares are currently trading around $76, down some 5% on the day.

Spruce Point Capital has also targeted Pennsylvania-based grocery store chain Weis Markets, diabetes monitoring device-maker Dexcom, and Burlington Stores, which runs clothing retailer Burlington Coat Factory. The firm announced its first long position, in healthcare products distributor Henry Schein, in three years last summer.

See more: Arts-and-crafts retailer Michaels is under fire from a short-seller who says Amazon and Framebridge are threatening its framing business