January 19, 2023



Fiat Lux Partners, a team of independent short activists, is issuing a public critical response to GlassHouse Research’s recent short report on Catalent, Inc. (NYSE: CTLT).

We believe that GlassHouse’s report represents a one-dimensional application of a boilerplate “forensic accounting” checklist which, in many cases, ignores or fails to address important contextual information, financial or otherwise. A more comprehensive review of GlassHouse’s claims, attended by the appropriate context, reveals that most of them are not as worrisome as depicted by the report, and that they have demonstrably not had the negative financial impact that the report suggests.

A less selective presentation of the facts enumerated in the report suggests that the financial “turmoil” described by GlassHouse is overblown. And, in several cases, we believe that GlassHouse’s observations and claims are plainly and demonstrably false.

We wonder, openly, how someone so versed in “forensic analysis” could have missed so many mitigating factors which, to us, appear clear and obvious.

Further, we believe that GlassHouse draws inappropriate conclusions from its “forensic accounting” analysis regarding management’s behavior and intentions. It frequently points to accounting phenomena as dispositive proof of financial wrongdoing by management: that management is “pulling forward” sales by “prematurely recognizing revenue,” and has been “using every accounting trick in the book” and “accounting gimmicks” to “aesthetically lift a deteriorating company.” We believe that these extremely aggressive claims are offered without evidence, and that the phenomena described can be attributed to more realistic and less sinister explanations.

We believe that, in sum, GlassHouse’s report represents an academic exercise in forensic accounting whose observations ignore the critical context that would be vital to determining whether CTLT is a viable short candidate. In a vacuum, these observations allow GlassHouse to “check the boxes” on the customary red flags of a classic forensic accounting analysis. But, in our view, it applies the “forensic accounting toolkit” so bluntly and mechanically that its findings, lacking context, are frequently meaningless, irrelevant, or entirely contrary to the arguments being made. Put in their proper context, GlassHouse’s claims do not amount to a compelling short case, in our view.