Lightspeed dismisses report from activist investor critical of company’s metrics

Lightspeed - NYSE Listing, September 11, 2020-1 (Dax Dasilva, Founder & CEO)

Lightspeed Commerce has dismissed a report from an American short-seller alleging the e-commerce company had inflated key metrics and wasn’t performing as well as it claimed.

The company cautioned investors against making decisions based on the report from Spruce Point Capital Management, a New York-based investment management firm that focuses on forensic research and short-selling.

“The report contains numerous important inaccuracies and mischaracterizations which Lightspeed believes are misleading and clearly intended to benefit Spruce Point.”

“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,” Lightspeed contended in a release, September 29.

Lightspeed “strongly encouraged” investors to consult with credible sources, including Lightspeed’s filings with the Canadian securities regulatory authorities and the US Securities and Exchange Commission, before making investment decisions.

Despite Lightspeed’s remarks, at the time of writing, the startup’s stock had dropped to $121.06 from the previous day’s close of $122.22. At time of writing, Lightspeed’s share price has dropped 13.7 percent since market close on Tuesday, September 28.

Lightspeed was responding to a report from Spruce Point that alleged “evidence of poor, inconsistent, and continually changing disclosures which leads us to believe that Lightspeed has engaged in a pattern of materially inflating the size, quality, and growth prospects of its business.”

Spruce Point also alleged that “Lightspeed massively inflated its business pre-IPO, overstating its customer count by 85 percent and gross transaction volume by 10 percent – a payment volume metric that a former employee described as ‘smoke and mirrors.’”

In its report, Spruce Point noted it has a short position in Lightspeed and owns derivative securities that stand to net benefit if its share price falls. Spruce Point has a long position in Shopify.

The investment firm also contended that Lightspeed would lose ground to Shopify and Amazon in its report.

RELATED: Lightspeed sees Q1 2022 revenues surge as economies reopen

For its part, Lightspeed responded that it is confident in its governance, financial reporting, and business practices. The company said it has consistently delivered revenue growth since its initial listing on the Toronto Stock Exchange in March 2019. In the quarter ended June 30, 2021, revenue of $115.9 million increased 220 percent from the prior-year quarter with software and transaction-based revenue growth of 78 percent.

In August, Lightspeed raised $823.5 million USD ($1.4 billion CAD) through a public offering. In a May 27 short form base shelf prospectus, Lightspeed disclosed plans to raise up to $4 billion CAD over the next 25 months through new issues or secondary offerings.

Founded in 2005, Lightspeed provides cloud-based commerce and point-of-sale software to retailers. The Montréal-based company, which trades on the TSX and NYSE under the symbol ‘LSPD,’ has made a number of major acquisitions over the past year, acquiring ShopKeep, Upserve, and Vend.

In June, Lightspeed revealed plans to acquire two California-based e-commerce companies, Ecwid and NuORDER, for a combined total of $925 million USD. During its Q1 2022 earnings call last week, Lightspeed said these acquisitions would help transform the company into a one-stop, e-commerce platform.

During its most recent earnings call, Lightspeed also said it was set to supply Elon Musk’s SpaceX with restaurants, ordering, and payments to support its hospitality operations at the American company’s California headquarters.

Charles Mandel

Charles Mandel

Charles Mandel's reporting and writing on technology has appeared in Wired.com, Canadian Business, Report on Business Magazine, Canada's National Observer, The Globe and Mail, and the National Post, among many others. He lives off-grid in Nova Scotia.