Shares of Uranium Energy (NYSEMKT:UEC) are down by more than 10% following the publication of a short report by Kerrisdale Capital. Kerrisdale is actually optimistic about uranium prices, although it believes that the company will not be successful in capitalizing on it.

First, the short seller notes that UEC shares outstanding have increased by 10x since 2005, which Kerrisdale jokingly notes is the “company’s best-selling product.” All the while, UEC was unable to take advantage of the last two uranium bull markets beginning in 2006 and 2010. The company has allegedly spent the last few years acquiring uranium deposits using its “expensive stock” and cash raised through stock issuances. Following a closer inspection of UEC’s resource edifice, Kerrisdale concluded that of the company’s estimated 140 Mlb of resource in the U.S., “none can be mined profitably at current uranium prices.”

Kerrisdale Issues Short Report on UEC Stock

Kerrisdale goes on to explain that a quarter of the resources require conventional mining in Arizona. This will likely pose a problem, as it is “unlikely to pass profitability or environmental hurdles this century.” The rest of the resources can only be mined in a low recoveries fashion, which could result in less than two-thirds of the resources being retrievable. In conclusion, Kerrisdale believes that only a quarter of the resources will be “economically viable,” even in light of higher uranium prices.

Uranium Energy’s Canadian resource portfolio is composed of five total assets that were acquired in transactions worth $350 million. Along with its U.S.-based portfolio, Kerrisdale notes that none of the Canadian assets can be mined profitably. Two of UEC’s Canadian assets have their resource estimate overstated by 50% to 100%, according to the short seller.

In the past five years, shares of UEC are still up by over 100%, despite the company issuing close to half a billion dollars of stock over the past 20 years. Kerrisdale attributes this to Uranium Energy using paid stock promotions, which include promotions from media companies founded by CEO Amir Adnani. Kerrisdale also writes that the company paid hundreds of thousands of dollars last month for stock promotions. That doesn’t exactly seem like a proper way to allocate capital.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.