After one of 2021’s most unusual yet interesting IPOs to date, Oatly could be in trouble after it was accused of fudging its numbers.
Having only floated on the Nasdaq back in late May, Oatly (NASDAQ: OTLY) has not exactly caused a storm in its young public life.
And things may get worse after it became the target of a scathing short-seller report.
What’s up with Oatly?
According to activist short seller, Spruce Point Capital Management, Oatly’s been up to no good. The firm is accused of shady accounting practices as well as publishing misleading data relating to its sustainability efforts.
In the short-sellers own words:
“Oatly will sorely disappoint investors and will never achieve profitability.”
If you have a spare 3 hours or so to pore over the report, you can find it here. But the TL;DR of its accusations are:
- 2018 U.S. revenue estimates provided by the company are double what other sources have given, raising accounting concerns.
- Costs are much more inflated than Oatly has stated.
- Oatly’s impact on water consumption is worse than standard dairy milk production, raising environmental concerns.
The big question now though is: should investors be worried?
While it’s never a nice feeling to see a company that you’ve invested in getting dragged through the mud, it doesn’t always have to be a flashing ‘SELL’ warning.
It’s important to remember that Spruce Point Capital Management is not an official regulatory entity like the SEC. And while they may have valid concerns from their findings, it is also in their best interest, as short-sellers, to see Oatly’s stock price fall.
Spruce Point has requested that Oatly bring in an independent auditor to investigate these accusations, but no response has been given. Investors did not appear too convinced by the report, with Oatly stock falling just 2.8%. I guess we’ll just have to wait and see with this one.
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