Spruce Point Capital Is Betting Against Remitly Global Stock, Short Seller Says Shares Could Fall To $9 Amid 'Tectonic Shift' Across Industry

Spruce Point Capital Management has announced a new short position against Remitly Global Inc RELY as the short seller believes there’s reason to be skeptical of the company’s financial reporting and valuation.

What To Know: Spruce Point targeted Remitly Global in a new bearish research report that provides evidence of doctored reviews and unreliable accounting practices, suggesting the stock is overvalued.

Benzinga contacted Remitly Global for comment on the report, with a representative responding, “Thanks for reaching out. We're aware of the report and are in the process of reviewing its claims. I will be back in touch as soon as possible.”

Remitly is a provider of cross-border remittance services through its mobile app and website. The company relies on positive customer reviews to drive business, according to Spruce Point.

“Based on our research, we do not believe that Remitly is leading authentically with its customer reviews. We find evidence that Remitly uses stock images and changes the purported names of people depicted in these images on its customer reviews website,” the short seller said.

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Spruce Point also reported it found evidence that Remitly “doctored its ratings” by artificially boosting rating review scores on Trustpilot.

The short seller highlighted recent executive departures and noted that Remitly has reported three areas of weaknesses in its internal control over financial reporting since its IPO in 2021. Furthermore, the company’s audit and risk committee is currently being led by executives with “connections to controversial companies.”

Spruce Point sees multiple headwinds the company is facing including the potential deportation of millions of immigrants as the company relies heavily on serving immigrant customers. The short seller also noted that cryptocurrency, specifically stablecoins, could put pressure on transaction fees and disrupt traditional money remitters like Remitly.

“[Remitly] has only one analyst calling it a ‘Sell’ while analysts project a consensus target of $29.50 per share implying +47% upside. However, we believe they fail to properly assess the tectonic shift happening in the industry toward stablecoins and crypto payments,” the short seller said.

Spruce Point highlighted other red flags including the company’s aggressive issuing of stock-based compensation, the co-founders selling shares through trading plans and the stock’s premium valuation to peers.

The short seller believes Remitly shares should be trading between $9 and $12 based on a discounted multiple to its closest competitor.

Spruce Point initiated a short position as it expects shares to underperform industry peers and the broader market moving forward.

RELY Price Action: Remitly shares were up 0.75% at $20.22 at the time of publication Tuesday, according to Benzinga Pro.

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