Investing.com -- Shares of UFP Technologies (NASDAQ: UFPT ) fell 2% following a report from Wolfpack Research, which announced a short position in the company. The research firm claims that UFP Technologies, known for producing single-use surgical drapes, is facing significant business challenges as its largest customer, Intuitive Surgical (NASDAQ: ISRG ), shifts to insourcing and sourcing from competitors.

Wolfpack Research alleges that UFP Technologies’ shipment volumes have dropped considerably, with import records indicating a 38% decrease in shipment weight from the second quarter of 2024 through the first quarter of 2025. This decline suggests that the company’s relationship with Intuitive Surgical, which accounts for 29% of UFPT’s revenue, may be deteriorating.

The report also points to Intuitive Surgical’s efforts to improve margins by manufacturing surgical drapes in-house, with 10% of production already moved to a plant in Mexico and plans for further production in a new facility in Bulgaria. Additionally, the research highlighted that Intuitive Surgical has begun purchasing from Microtek, a direct competitor to UFP Technologies, as of October 2024.

The timing of UFP Technologies’ first-ever earnings call in its 32-year history as a public company has also been called into question by Wolfpack Research, suggesting that delayed disclosure of Intuitive Surgical’s insourcing plans could be a red flag. The report criticizes UFPT management for selling $48 million in stock since March 2024, amidst these unfolding challenges.

Wolfpack Research further criticizes UFPT’s acquisition strategy, particularly the purchase of AJR Enterprises, which is described as a stagnant operation with no growth prospects and reliant on a single customer, Stryker Corp. (NYSE: SYK ). The report suggests that UFPT overpaid for acquisitions that will likely exacerbate the company’s current problems.

Investors are now watching closely as UFP Technologies confronts these allegations and navigates the potential impact on its future revenue and growth narrative. The market’s reaction to the short-seller report reflects concerns about the company’s reliance on a key customer and the strategic decisions made by its management.

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