The actions of the first and only Uruguayan unicorn dLocala company that debuted on Wall Street in June 2021, fell as much as 43% in the last few hours, going from almost $21 to around $10, after rumors of possible fraud committed by this company were made public.
US hedge fund Muddy Waters Capital denounced “possible fraud” and sold dLocal shares in a stock trade that left them a profit, even if the shares fell in price individually.
The fund added that the Uruguayan company has had repeated failures in its verification of third parties and that its collection accounts are flatly contradictory.
In a statement to investors, dLocal denied the hedge fund’s claims. “Short sales reports are often designed to lower the share price to serve the interests of short sellers to the detriment of the company and its shareholders,” said the company of Uruguayan origin.
On Thursday’s close, the shares rose again after hitting their all-time low of $9.19. In total, the maximum loss was 51% for each security.
What Muddy Waters Capital Said
Muddy Waters Research LLC is an American “due diligence”-based private investment firm that conducts research on public companies while simultaneously taking investment positions that reflect their research.
The firm has exposed accounting and fraud problems at various companies, primarily in China, but also in other countries in Asia, Europe and North America.
He has also published reports on companies such as Sino-Forest, Noble Group, Focus Media, Olam International, Groupo Casino, Orient Paper, China Media Express, Bank of the Ozarks, Rino International, Bolloré, American Tower Corp., and TeliaSonera. In some he has detected alleged irregularities.
Regarding dLocal, he stated that “there is a contradictory discrepancy between two accounts of key subsidiaries and collection accounts.” The holding company assured that, as a result of its investigation, it found a “series of lies” on the part of the Uruguayan company, “along with accounts that it has altered to corroborate the lies.”
“These types of seemingly innocuous misstatements are instead often signs of corrupt books because it can become quite a stress to keep the numbers correct once you start tinkering with them,” added Muddy Waters.
Carson Block, CEO and owner of the investment firm, told a news conference in London that if dLocal were a company with “serious people” who really “wanted to run a company,” they would not have sold $1 billion in shares in the first five months of going public.
According to Bloomberg, Muddy Waters Capital and Carson Block are under investigation in a broader investigation of market manipulation. The US Department of Justice is behind alleged stock short sales and “coordinated operations” for market manipulation.
