Fast-growing Canadian technology company Lightspeed is pushing back after a short seller alleged the company has misled investors about its financial health, causing a $2 billion plunge in the company’s value.
On Wednesday, Spruce Point Management, an American short-selling investment firm with a history of targeting Canadian companies, put out a lengthy report on Montreal-based Lightspeed Inc., alleging the company has covered up “massive inflation” of how many customers it has, how much money it makes from them, and how much growth potential it has.
Lightspeed is a payment processing company that helps small businesses sell things online and in person. It has been compared to Ottawa-based Shopify, which is currently the most valuable company in Canada.
Lightspeed “baits investors with its massive potential in its payments solution, but we believe it has not been transparent about competitive pressures and material margin decline,” the report says, among other allegations.
“We believe Lightspeed is crowding into Shopify’s space, and will be forced to compete head-to-head with it, and new entrants such as Amazon. We believe Lightspeed will lose the battle.”
WATCH | Spruce Point lays out its case against Lightspeed:
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The report prompted shares in Lightspeed to plummet by more than 11 per cent on Wednesday, closing at $126 a share on the Toronto Stock Exchange.
Prior to the short seller’s report, the company’s share price has been a rocket ship during the pandemic. After bottoming out at around $12 a share early in the pandemic, Lightspeed’s value has marched steadily higher for more than a year to nearly 10 times what it was worth in its IPO barely two years ago.
Lightspeed has seen growing demand for its services as more retailers start to sell things online during the pandemic, but the company has also grown because of an aggressive strategy of acquiring smaller rivals, something Spruce Point says is also dubious.
Spruce Point says the company is massively overvalued, and is poised to plummet to as low as $22 a share.
Short sellers such as Spruce Point make money when stocks in the companies they are shorting go down. They do this by borrowing existing shares, selling them, and then buying them back later to replace what they borrowed at what they hope will be a lower price later on.
WATCH | How short selling works:
How short selling works
2 years ago
An animated explanation of how people make money from stocks losing value 0:46
Lightspeed isn’t the first Canadian company that Spruce Point has targeted. Previously, the short seller has taken aim at Dollarama, Canadian Tire and waste management firm GFL, with varying degrees of success.
Lightspeed said nothing to address the report for most of Wednesday, but after markets closed the company put out a short, terse statement denying the allegations.
“The report contains numerous important inaccuracies and mischaracterizations which Lightspeed believes are misleading and clearly intended to benefit Spruce Point, which itself has disclosed that it stands to profit in the event that the stock price of Lightspeed declines,” the company said.
Spruce Point has not declared how much of the company’s shares it is shorting, but data compiled by Bloomberg shows that about 2.5 million shares in the company are being shorted overall. That’s about two per cent of the company.
“Lightspeed is confident in its governance, financial reporting and business practices. Lightspeed has consistently delivered revenue growth since its initial listing on the Toronto Stock Exchange in March 2019.”
Investors don’t seem to know who to believe on Thursday, as Lightspeed shares jumped up by five per cent when the stock market opened, but nearing midday the stock was once again in negative territory, changing hands at about $125 a share. Wednesday’s sell-off knocked $2 billion off the value of the company.
For its part, Spruce Point called Lightspeed’s defence “laughable.”
Lightspeed “provided a total dodge and deflect response and effectively told all its investors to go buzz off with that boilerplate non-response PR late yesterday,” Spruce Point said in a tweet on Thursday morning.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
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