The activist investors behind Spruce Point Capital revealed Wednesday the results of an extensive investigation into Oatly that says the oat milk darling will never become profitable or meet investors expectations.
Oatly shares dropped more than 5% Wednesday before recapturing around half of that by the close of trading. Shares were down 2% as of 10 a.m. Thursday.
Oatly, which has a market capitalization of almost $12 billion, responded that it “is aware that a short seller is making false and misleading claims regarding the company. This short seller stands to financially benefit from a decline in Oatly's stock price caused by these false reports. Oatly rejects all these false claims by the short seller and stands behind all activities and financial reporting.”
Spruce Point’s 124-slide presentation largely questions both management’s execution as well as the businesses’ broader sustainability claims — and even includes some documents and data uncovered through Freedom of Information Act requests. Here are the highlights.
- Spruce Point cautions that it believes Oatly has misled investors, including claims of misstating past revenues and other financials, exaggerating claims of success in China, and previously overstating how proprietary its formulas and manufacturing processes are.
- "We believe Oatly has acted recklessly in pursuit of profits to race towards an IPO to sell its stock at an inflated valuation."
- Amid evidence of losing market share and shelf space, Oatly’s valuation has swelled more than six times its $200 million from Blackstone in 2020.
- The entire plant-based dairy market is expected to be worth $21 billion by 2025. Oatly’s valuation is more than half of that as it is today, even though it’s "unlikely to us that Oatly ever captures this percentage of the market."
- Its Utah plant may be costing as much as 100% more than its initial budget.
- Its New Jersey plant has been out of compliance with the EPA due to wastewater treatment issues for several quarters and has been overstating its sustainability claims broadly.
- In addition to allegedly having three accounting auditors in six years, the report claims "investors should also be concerned that its CFO and Audit Chair both obscure their roles at prior corporate accounting scandals."
- Also, this one-liner: "World class in ‘Mind Control’ marketing. We believe, a second-rate finance and operations team."
The entire Spruce Point report, which calls for Oatly to hire an independent forensic accountant to investigate these claims, can be found here.
By The Numbers: Oatly
Market Cap: $11.6 billion
Stock Price: $19.70 per share
Daily Change: down 4%
Percentage of Shares Short: about 1% [compared to 16% for Beyond Meat]
2020 Sales: $420 million, per IPO filings.
Distribution: 60,000 retail doors and 32,200 coffee shops across more than 20 countries globally.
This article was originally published in Chloe Sorvino’s newsletter, Forbes Fresh Take, which is all about big ideas changing the future of food. Subscribe here.
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Wild Oats? Inside Spruce Point’s 124-Page Attack Alleging Mismanagement And False Claims At Oatly - Forbes
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