- Oatly fell 6% to an all-time low Wednesday as short-seller Spruce Point Capital accused the company of misleading investors and overstating revenue.
- The short-seller said the oat milk company has made misleading claims about its commitment to ESG standards.
- Spruce Point also said Oatly's $12 billion valuation is unsustainable and new investors will get hurt.
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Oatly fell 6.1% to an all-time low of $19.40 Wednesday as short seller Spruce Point Capital Management accused the oat milk company of misleading investors on multiple fronts and overstating its revenue.
In a report published Wednesday, Spruce Point Capital Management said there is a long-term potential Oatly faces insolvency.
"While investors are enamored with its sales growth in the plant-based food fad, and its commitment to ESG practices, we believe they should be focused on its loss of market share in Sweden and the U.S., minimal barriers to entry, lack of competitive advantages, rising commodity input costs, and supply challenges created partly through poorly planned production facilities," Spruce Point said. "As such, we believe Oatly will sorely disappoint investors and will never achieve profitability."
The short seller accused Oatly of shady accounting practices, claiming that the oat milk company has overstated its revenue and gross margin by 640 basis points. Spruce Point warned investors that Oatly has churned through three auditors in six years, and its CFO and audit chair were both involved in prior corporate accounting scandals.
In addition, Spruce Point said Oatly's nearly $12 billion valuation is unsustainable and will only hurt new investors.
"Oatly's valuation has mysteriously ballooned nearly 6x since a $200m investment by Blackstone in July 2020 despite our evidence pointing to market share loss. Oatly is trading at 17x '21E sales and 75x adjusted gross profit and a $12bn valuation (57% of the 2025 total projected non-dairy milk market)," the short seller said.
Spruce Point is calling for Oatly's board to hire an independent forensic accountant to open an investigation the short seller's claims.
The short seller also blasted Oatly's ESG commitment, specifically the company's claims that its conversion from cow's milk to oat milk results in 80% fewer carbon emissions, 79% less land usage, and 60% less energy usage.
Oatly emphasized the claims on one of its first slides in its June investor presentation, but the data was from a 2013 study that didn't account for Oatly's recent expansion into the US and Asia.
"In addition, we believe Oatly has "cherry-picked" the study's results by failing to show that its impact on water consumption is worse than dairy milk," said the short seller. "Through a FOIA request, we learned that Oatly's production process also generates dangerous volumes of wastewater that requires it to build its own treatment facilities."