Key Points

  • A negative report by short-seller Spruce Point Capital claims Lightspeed overstated its customer count.
  • Spruce Point says Lightspeed's stock could fall by up to 80% over the long term.

What happened

Shares of Lightspeed Commerce (NYSE: LSPD) were plummeting today after U.S. short-seller and investment manager Spruce Point Capital released a bearish report on the Canadian-based payment solutions company.
The tech stock fell by as much as 14% today and was down by 11.9% as of 3:25 p.m. EDT.
So what

The most eye-popping statement from Spruce Point's report is that the investment firm believes Lightspeed's stock could fall by 60% to 80% over the long term. Of course, predictions like that are nothing more than speculation; nevertheless, Spruce Point laid out a few reasons why it thinks Lightspeed isn't a good investment.

For example, the report claims that Lightspeed overstated its customer count by 85% and its gross transaction volume by 10% in pre-IPO documents. The report said, "We question why Lightspeed reported '50,000+' customers up through November 2018, and then ceased customer count disclosures to investors when coming public in March 2019?"
Spruce Point also says the company's organic growth is slowing and that Lightspeed's recent acquisitions come with "escalating costs with no clear path to profitability."
Now what

It's worth pointing out that Spruce Point Capital has a short position in Lightspeed and can therefore benefit if the price of Lightspeed's stock falls. That doesn't necessarily mean everything in Spruce Point's report is inaccurate, but investors do have to take short-seller reports with a grain of salt.
And unless more information about these claims comes to light, investors probably shouldn't change their investment thesis for Lightspeed, or any company, based on one negative short-seller report.