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• According to the short seller’s report, Puerto Rico’s federally appointed Financial Oversight and Management Board revoked approval of the larger Power Expectations-led emergency power project on August 14.
• The report also criticizes Flotek for missing red flags about its partner, Power Expectations.
• Flotek did not respond to Stocktwits’s request for comment on the allegations. 

Shares of Flotek Industries Inc. (FTK) dropped 20% on Monday following a short-seller report from Wolfpack Research claiming that the company’s recently announced $400 million Puerto Rico power deal has been canceled and remains undisclosed to investors.

Wolfpack, which is short the stock, says the deal made up about 57% of Flotek’s near-term backlog. The firm argues that Flotek should have informed shareholders sooner. 

Flotek did not respond to Stocktwits’s request for comment on the allegations. The stock clocked its worst decline since March 2020. 

Oversight Board Ends The Contract

According to the short seller’s report, Puerto Rico’s federally appointed Financial Oversight and Management Board revoked approval of the larger Power Expectations-led emergency power project on August 14. Flotek’s $400 million role was a major piece of the much bigger project. 

The board ordered the Puerto Rico Electric Power Authority to terminate the roughly $6 billion agreement and referred the matter for possible criminal investigation, the report said.

The report also criticizes Flotek for missing red flags about its partner, Power Expectations. Those included the firm’s limited size and experience, as well as the criminal background of its CEO, Eddie Echevarria, a convicted felon. Local media had already reported some of these details before Flotek announced its role on August 3, the report said. 

Flotek highlighted the contract in its August 3 announcement and earnings call, and shares rose sharply afterward. Wolfpack calls the cancellation clearly material and says the company’s lack of any public update since the problems became known is a disclosure failure.

How Did FTK Retail Traders React?

On Stocktwits, retail sentiment around FTK stock remained in ‘neutral’ territory over the past 24 hours, while message volume remained ‘high.’ 

A Stocktwits user raised doubts about whether the stock would now slip back to the teens. 

FTK stock has gained 68% year-to-date. 

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