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Short seller Muddy Waters Capital announced it has taken out a short bet against Uruguayan payments firm dLocal, calling the company “likely a fraud,” which caused its shares to dramatically drop on Wednesday.

Texas-based Muddy Waters Capital published a research report on Wednesday during a conference in London. Its chief investment officer Carson Block said cited concerns about its disclosures to investors, its governance structure and controls of client funds.

The report made shares in dlocal
DLO,
-50.71%

tank almost 50% on Wednesday afternoon trading but they were up 5% in pre-market trading on Thursday. Its stock is down 70% in the year to date, and has a market cap of $6.3 billion.

“DLO strikes us as being unduly complex, having poor controls including an over-reliance on manual processes, deficiently governed, and a regulatory arbitrageur,” the report outlined.

But in a statement on its website, Dlocal said Muddy Waters’ claims were “groundless” and will clarify the allegations in due course.

“The report contains numerous inaccurate statements, groundless claims and speculation. Short seller reports are often designed to drive the stock price downwards to serve the short seller’s interest to the detriment of the company’s shareholders.

“We caution shareholders from making investment decisions based on this report. Dlocal will rebut the allegations in the appropriate form in due course.”

Dlocal made its IPO debut in June 2021, and since its inception has connected merchants to consumers all over Latin America, Asia and Africa through its payments processing technology.

The firm was backed by private equity firm General Atlantic back in 2019. Hedge fund tech giant Tiger Global is an investor, having increasing its position by as much as 2.5 million shares to a total of almost 4.3 million shares valued at $88 million at the end of September.



Read More: Muddy Waters takes short position against U.S.-listed Uruguayan payments company

2022-11-17 11:06:00

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