It’s been a busy week here at Premium. First the rumors of and eventual merger of Kirkland Lake, and now a short report by Spruce Capital on Bull List stock Lightspeed (TSE:LSPD).
Speaking of Kirkland Lake, we will have our full summary and thoughts of the deal in our Sunday e-mail this week.
A quick summary of our thoughts on the Lightspeed short report
The report is, much like many other reports published by Spruce Capital (which I’ll speak on some notable examples), an attempt at fear mongering and very poorly put together. We would have gotten this e-mail out a bit earlier, but the report is so large, it did take a lot of time to digest.
A quick note as well, I (Dan) have bought more LSPD on this weakness.
The short-selling firm attempts to attack Lightspeed’s poor customer base by highlighting allowances for bad debt during the pandemic being sky high. Keep in mind, we’re speaking allowances here, not actual bad debt.
It is of our opinion that Lightspeed took a cautious approach to the pandemic and allowed for a lot of bad debt simply because of the uncertainty moving forward, as its operations relied heavily on small to medium sized businesses and restaurants. It even states in its quarterly reports that the forward looking uncertainty has had a large impact on its allowances.
The report goes on to accuse the company of a wide variety of things, including fabricating its customer base, intentionally hiring auditors with no experience, and even includes a tweet from a random Twitter user with no major following.
The short-selling firm has even gone as far as to reach out to Lightspeed’s recent acquisitions via Twitter and ask them to reconsider.
Overall, we’ll spare you most of the details from the long winded report and state our long term thesis is still very much in tact on Lightspeed.
Will Lightspeed respond?
It’s difficult to say. Spruce Capital targeted Canadian Tire in late 2019, and Canadian Tire issued a statement urging investors to not act upon the report as it contained an extensive amount of misinformation.
The company has been known to call out Canadian corporations, and even though it mentions a couple of its biggest successes in this report, it also fails to mention very recent reports produced on companies like Canadian Tire, Dollarama and GFL Environment, in which the stocks are up 33%, 54% and 87% respectively since their reports were made public.
There is two routes this situation could go in our opinion. The first being this report is forgotten about in a few weeks or months and Lightspeed continues to gain ground. Or, it could cause extensive volatility in its share price for the next while.
Either way, I was happy to add at these levels, and it will remain on our Bull List. Any questions, feel free to drop them on the Discord or the Q and A.
