Hawthorne-based OSI Systems Inc. saw its shares tumble more than 30 percent on Wednesday following a short seller’s declaration that the company was “rotten to the core.”

Carson Block, founder and chief investment officer of hedge fund Muddy Waters Capital in San Francisco alleged on Bloomberg TV that he had, "smoking-gun proof that, when this company got a turn-key contract a few years ago in Albania, worth $150-$250 million top line, that they paid a bribe or kickback of almost half of that concession. To me, this is damning evidence." The Muddy Waters website states that it’s likely OSI’s accounts are misstated as a result.

Block cited former OSI employees as sources for his claim, according to the hedge fund’s website. He said he was short selling the company. Shorting is a way for traders to turn a profit when a stock’s price declines.

Muddy Waters also estimates that 50 to 55 percent of OSI’s EBITDA comes from one contract in Mexico that is up for renewal in 2018.

OSI, which designs and manufactures specialized electronic systems and components for use in the homeland security, medical, defense and aerospace industries, declined to comment beyond the press release it send out today about a short seller’s “misleading allegations.”

The company’s statement said that the Muddy Waters report “had an undue impact in the public sphere.” The company’s stock closed at $59.52 on Wednesday having traded at $84.47 the day earlier. It closed up 7.75 percent on Thursday at $64.13.

Multiple law firms have announced investigations, including Century City-based Glancy Prongay & Murray, on behalf of OSI’s investors citing concern about the company’s alleged violation of federal and securities law.

OSI was founded in 1987 and has 2,400 employees with a market capitalization of $1.2 billion.

Manufacturing and trade reporter Shwanika Narayan can be reached at snarayan@labusinessjournal.com or 323-556-8351. Follow her on Twitter @shwanika.