June 12 Shares of TransDigm Group Inc
fell as much as 7.3 percent to $250.18 on Monday, after
Massachusetts Senator Elizabeth Warren called for an
investigation into the aircraft components supplier's government
TransDigm may have avoided sharing cost information with the
government for parts for which it is the sole source supplier,
Warren wrote in a letter dated May 19 to Acting Inspector
General Glenn Fine at the U.S. Department of Defense.
The company could have also "unreasonably raised prices" on
many parts shortly after completing acquisitions of the
companies that produce them, Warren's letter suggested. (bit.ly/2sUQxO5)
Cleveland, Ohio-based TransDigm gets about 30 percent of its
sales from the defense industry.
The company is already facing heat from U.S. Congressman Ro
Khanna, who in March asked the Department of Defense for a probe
into its business practices "for potential waste, fraud and
abuse in the defense industrial base".
TransDigm has also been targeted by short-seller Citron
Research, which issued a critical report in January suggesting
that the company was vulnerable to pricing pressure as President
Trump pressured defense contractors Boeing Co and
Lockheed Martin Corp, two of TransDigm's major
customers, to reduce costs.
However, some analysts refuted Citron's arguments and
attributed TransDigm's strong margins mainly to its substantial
exposure to the aerospace aftermarket and meaningful
contributions from acquisitions.
Up to Friday's close, TransDigm's stock had risen 8.4
percent this year, compared with a 13.3 percent increase in the
Dow Jones U.S. Aerospace and Defense index.
(Reporting by Ankit Ajmera in Bengaluru; Editing by Saumyadeb