Spruce Point Capital Management claims there is something rancid about Oatly‘s (OTLY) accounting practices and “green” efforts. Oatly stock fell Wednesday.
The activist short seller’s report claims that Oatly omitted and manipulated facts in its prospectus and in an investor presentation last month. The assertions were first reported by CNBC.
“We observe periods of large divergence in revenue and accounts receivable growth rates at Oatly,” Spruce Point’s report said. “This is a classic sign of potential accounting shenanigans and is often cited as a top red flag to predict accounting scandals.”
Spruce Point argues that the Swedish maker of alternative milk products will never become profitable.
“We believe that Oatly will sorely disappoint investors and will never achieve profitability.”
Ahead of its IPO, Oatly disclosed 2020 financials that showed sales jumped 106% to $421.4 million, while losses widened to $60.4 million from $35.6 million in 2019.
Shares fell 2.8% to close at 20.54 on the stock market today. Oatly stock debuted in May after its IPO priced at $17 a share, raising $1.43 billion.
Oatly was founded in 1994 in Sweden, but it gained worldwide recognition when it entered the U.S. market in 2016. Products include ice cream, yogurt and baking supplies like vanilla custard. The company went public in May.
The popularity of nondairy milks has risen in recent years amid health and environmental concerns. Plant-based meat products like Beyond Meat (BYND) and Impossible Foods, which is considering an IPO later this year, are also seeing a surge in popularity.
On its website, Oatly says that the food industry is responsible for 25% of global greenhouse gas emissions. It says half of those emissions come from the meat and dairy industry.
But Spruce Point argues that Oatly “doesn’t practice what it preaches,” claiming that the company failed to include data in a sustainability report that shows it uses more water with its production techniques than companies do in the production of cows’ dairy milk.
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