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     Kubang Celebrity Bewarse Username: Kubang Post Number: 38586 Registered: 09-2011 Posted From: 24.64.245.215 Rating: N/A |
On Wednesday, October, 4 Citron Research Analyst Andrew Left issued a negative report on one of our holdings, Shopify Inc. (NYSE: SHOP). Mr. Left is a famous short-seller. He looks for companies that he believes are significantly overvalued, and then he sells the shares short so that he will profit as the stock price falls. Sometimes Mr. Left questions a business model or a potential market size, but that’s not what he outlined about Shopify. Instead, he accused the company of fraud. Specifically, he questioned the number of users on the Shopify platform, suggesting it had less than 10% of the users it claimed (30,000 instead of 500,000), and he accused the company of violating several Federal Trade Commission regulations regarding advertising and misleading and false statements. The stock dropped 12% on the news and fell another 8% Thursday day before recovering. Officials from Shopify denied the allegations, defended the company, and also pointed to their growing user base through a recent venture with Instagram and a new point-of-sale credit card reader. I’m watching the situation closely. Publicly traded companies must comply with financial audit standards, so there is reason to believe the company is truthful. But, as we know through our own John Del Vecchio’s forensic accounting work, if Shopify did misrepresent the business, it wouldn’t be the first company to do so. For the moment, we’re sticking with Shopify. However, if more information comes to light that shows malfeasance, I’ll make a change to the portfolio and let you know. Ignorance is bliss |