Investing.com -- Clear Secure , Inc. (NYSE: YOU ) stock declined 3.3% after being named as a short by Spruce Point. The report criticized the company’s value proposition, raising concerns about its gross margins and financial disclosures. Spruce Point’s analysis suggests that Clear Secure, which specializes in identity security and primarily serves the aviation industry, may be overvalued due to a misperception of its business model.

The report argued that Clear Secure’s services are heavily reliant on human resources, contrary to the perception of it being a high-margin technology subscription service. Spruce Point estimates Clear Secure’s gross margin at 61.5%, significantly lower than the 85.8% reported by the company. The firm also expressed serious doubts about recent changes in Clear Secure’s accounting policies and the way it reports key financial metrics such as active members, revenue, and free cash flow.

Furthermore, the report highlighted potential risks such as the company’s declining value proposition, the threat of new technologies and policies like TSA’s Touchless ID program, and reduced investment in research and development. Partnerships that have been crucial to Clear Secure’s growth, including those with major airlines and American Express (NYSE: AXP ), are reportedly weakening, which could limit future expansion.

Governance issues were also a point of contention, with Spruce Point pointing out concerns regarding leadership, shareholder governance, and insider stock sales. The report mentioned the turnover in Clear Secure’s management and the background of its current Chief Accounting Officer, who was previously involved with a company under investor and SEC scrutiny.

Spruce Point concluded that these factors could lead to a 30% - 50% potential intermediate-term downside risk for Clear Secure’s share price, expecting it to underperform against the technology and transportation sectors, as well as the broader equity market. The report’s findings have prompted investor caution, reflected in the stock’s decline during the trading session.

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