Short seller accuses Oatly of overstating revenues and profit margins
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Oatly is allegedly bamboozling its investors, overstating revenues and profits even as it loses market share, according to an explosive report by a short seller.
The Swedish maker of oat-based milk substitutes — which listed its shares on the Nasdaq in a splashy May debut that valued it at more than $12 billion — has likewise been “greenwashing,” or misleading customers about its sustainability practices, according to the Wednesday report from Spruce Point Capital Management.
Among the allegations is that Oatly has been employing shady accounting methods — “We believe Oatly has misstated revenues” — and that its chief financial officer and audit committee chair were previously involved in corporate accounting scandals.
The 25-year-old company has “plowed through” three auditors in six years, a fact it does not disclose in its investment prospectus, according to the report.
After falling as much as 7 percent in early Wednesday trades, Oatly shares recently were off 2.1 percent at $20.67.
“The company is aware that a short seller is making false and misleading claims regarding the company,” an Oatly spokesman said in a statement. “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.”
Oatly, which is sold at mass market retailers including Walmart, Target, Trader Joe’s and Whole Foods, costs about $5 for half a gallon — or nearly double what regular milk costs. It’s also offered at major coffee chains, including Starbucks. It made its US debut as plant-based milk substitutes were taking off about five years ago.
Last year, Oatly scored some high-profile backers, including a group led by Blackstone Group investing more than $200 million that included Oprah Winfrey, Natalie Portman, Jay-Z’s entertainment agency and former Starbucks CEO Howard Schultz.
Oatly also stands out for its offbeat marketing. The company debuted a memorable low-budget commercial at this year’s Super Bowl, which featured Oatly CEO Toni Petersson sitting at a piano in the middle of a field singing, “Wow! Wow! No Cow!”
Spruce Point also accuses Oatly of misleading the public about its sustainability initiatives, pointing to a New Jersey facility that is out of compliance with the Environmental Protection Agency and has high levels of waste water emissions.
“Our FOIA uncovered that location was inspected by local environmental health experts and cited for excessive trash dumping,” Spruce Point claims. “In our discussion with former employees, we learned that Oatly has struggled with logistics and high shipping costs. As noted, transportation costs are a big driver of Oatly’s climate impact.”
The investment firm also alleges that Oatly is losing market share as newer competitors flood the market and its formula is easily reproduced.
“We believe Oatly overstates the proprietary nature of its business, and that in the long-run, any such advantages will be competed away. At the core, oat milk is made from oats, water, enzymes and flavoring ingredients.”
The investment firm has made a bet against Oatly shares that will pay off if they fall. Spruce Point said its report is based on interviews with multiple former employees, confidential company reports and data obtained from freedom of information reports.
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