GREENWICH, CONN.— XPO Logistics Inc. abandoned a potential acquisition last year after a negative short-seller report triggered a decline in the logistics company’s share price, according to Chief Executive Bradley Jacobs.
The Dec. 13, 2018, report from hedge-fund manager Spruce Point Capital Management LLC accused XPO of hiding losses through aggressive accounting, and criticized the roll-ups Mr. Jacobs used to build XPO into one of the largest logistics and freight transport providers in North America.
XPO called the report “intentionally misleading, with significant inaccuracies,” and several analysts rallied to the company’s defense. But the company’s stock price, already dented after XPO lowered its 2019 earnings guidance earlier that week, nose-dived 26% the day the report was released.
The company, which had said it was prepared to spend up to $8 billion on new acquisitions, pulled back from its deal-making strategy and has announced two share buybacks totaling $2.5 billion since then.
“We were very close to doing an acquisition before that short-seller report came out,” Mr. Jacobs said in an interview Tuesday at XPO’s headquarters. “And then the stock came down and we said, ‘OK, well, we want to buy our own stock rather do an acquisition.’”
Mr. Jacobs declined to identify the acquisition target or the particular business area he was considering.
Previously, XPO has said its merger strategy was largely aimed at expanding its existing services. The company provides trucking, freight brokerage, warehouse management and online fulfillment to customers including IKEA, Amazon.com Inc., Verizon Communications Inc. and Zara owner Inditex SA .
The shift in strategy comes as several longtime executives have left the company in recent months, and this week XPO terminated Chief Operating Officer Kenneth Wagers, a former Amazon executive brought on less than a year ago. The company said it was “returning to an executive lineup that makes the most commercial sense,” now that deal activity is on hold.
Mr. Jacobs said the company will eventually return “to the M&A market and we’ll grow the business through M&A,” he said.
“The business that we’ve acquired and integrated and optimized is functioning very, very well,” Mr. Jacobs said. “Organically, we grew our top line last year by 9.3%,” while XPO’s adjusted full-year earnings before interest, taxes, depreciation and amortization increased by 14.3% compared with 2017.
The company became an investor favorite after growing rapidly through acquisitions between 2012 and 2015 in the U.S. and Europe.
But last year’s third-quarter earnings came in lower than some analysts had expected, and allegations of worker mistreatment at XPO operations in Tennessee and California generated tough media and political attention.
XPO’s fourth-quarter earnings released last month also missed expectations, in part, the company said, because its biggest customer unexpectedly pulled about $600 million in business in late 2018. That customer was identified as Amazon by a person familiar with the matter.
Amazon declined to comment for this article.
Jason Seidl, a transportation analyst with Cowen Inc., said that the company remains strong and is being hit in part by changes in the larger logistics market after a strong 2018. “It’s not like suddenly XPO is in a bad business,” he said.
“Yeah, they lost Amazon,” Mr. Seidl added. “But you can replace customers.”
Write to Jennifer Smith at [email protected]