Shares of PetIQ Inc. PETQ, -13.06% plunged 13.1% in morning trade Tuesday, putting them on track for their worst one-day performance since going public in July 2017, after short seller Spruce Point Capital said it believed the stock could fall as much as 90%. Spruce said PetIQ occupies “a murky space” in the pet pharmaceuticals market, in which the non-veterinarian distributors, such as PetIQ, buy excess prescription and over-the-counter product from veterinarians then sell them to retail customers. “Manufacturers are increasingly beginning to bypass the grey market and sell directly to retail…showing cracks in PetIQ’s economic ecosystem,” Spruce wrote in a research note. “Wider competition in the pet medicine distribution space and greater transparency into distributor margins among retailers could bring PetIQ product segment operating margins-8%-9% as of today-closer to the 1%-3% margins shown by other pharmaceutical distributors.” PetIQ did not immediately respond to a request for comment. Spruce also said there appeared to be “suspicious circumstances” around PetIQ’s acquisition of VIP Petcare completed in January 2018, and said earnings quality has been “poor.” The stock has climbed 18.5% over the past 12 months while the S&P 500 SPX, -0.23% has gained 10.7%.

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