Pure Storage Shares Tumble After Kerrisdale Capital Reveals Short Position

Pure Storage shares fell 2.12% to $76.24 on Thursday morning after Kerrisdale Capital revealed it is short on the company's shares. Kerrisdale Capital stated that it is short shares of Pure Storage.

Pure Storage (NYSE: PSTG) experienced a 2.12% drop in its stock price to $76.24 on Thursday morning following the revelation by hedge fund Kerrisdale Capital that it had taken a short position in the enterprise storage company. Kerrisdale Capital released a detailed report questioning Pure Storage's $27 billion market valuation and expressing doubts about its growth prospects.

The report highlighted concerns about Pure Storage's competitive differentiation and its product portfolio's positioning to capitalize on cloud and AI infrastructure spending. Kerrisdale specifically challenged Pure Storage's claims about its quad-level cell (QLC) flash-based products, suggesting they are unlikely to replace hard disk drives (HDDs) in hyperscale environments. The hedge fund's total cost of ownership analysis concluded that HDDs still hold a "5-6x TCO advantage versus flash-based solutions" [1].

Kerrisdale also cast doubt on Pure Storage's recent software licensing agreement with Meta, stating that the features offered are "narrow and replicable" and predicting that Meta will not purchase Pure Storage's hardware products. In the enterprise storage market, which represents Pure Storage's core business, Kerrisdale described competition as "knife fights in phone booths" with limited opportunities for meaningful market share gains against rivals such as Dell, Hewlett Packard Enterprise, and NetApp [2].

Furthermore, Kerrisdale criticized Pure Storage's software business, noting that it largely consists of maintenance, support, and pre-purchased upgrade revenue, which the fund believes does not justify the SaaS-style valuation multiples assigned by bullish investors.

Despite the decline, Pure Storage shares have gained approximately 25% year-to-date.

References:
[1] https://investorshub.advfn.com/market-news/article/15735/pure-storage-shares-drop-after-kerrisdale-takes-short-position
[2] https://finance.yahoo.com/news/pure-storage-stock-falls-kerrisdale-135523686.html