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

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.

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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.

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.