Bean Capital Limited - Short seller Blue Orca's report causes Shift4 Payments, Inc. stock to plummet

The short seller Blue Orca Capital filed a report on Wednesday alleging that Shift4 Payments (FOUR) participated in "highly questionable and excitable-aggressive accounting maneuvers" in 2022. FOUR's stock fell as a result of the Blue Orca study.
GUERNSEY, Virgin Islands, British - May 25, 2023 - PRLog -- Four shares fell 8.7% to settle at 62.59, recouping losses on the stock market today.

The digital payment system Shift4 did not react to a request for comment on the Blue Orca report. Blue Orca disclosed in its report that it had a short position in Shift4.

Allentown, Pennsylvania-based most of FOUR's income comes from clients in the hotel and restaurant sectors, as well as casinos. As of 2022, Chief Executive Jared Isaacman held over 80% of FOUR's voting rights and 35% of the business equity.

Blue Orca Report: FOUR Stocks

"We see Shift4 as a roll-up of low-tech POS (point-of-service) systems and payment processors that is significantly less profitable, generates far less cash, and is materially more levered than traders are led to believe," Blue Orca stated.

"As Shift4's value fell through 2022, we assess that its CEO faced the possibility of a margin call from an abnormally significant sequence of stock pledges, presenting an existential threat that he would be obliged to sell as many as ten million shares (12% of diluted shares outstanding")," the research said.

"With the specter of a margin call hanging over the stock, we believe Shift4 engaged in a string of highly questionable and hyper aggressive accounting maneuvers almost designed to keep the stock alive, from cash flow manipulation to inexplicable distributor acquisitions that enabled it to take advantage of a major component of COGS (cost of goods sold)," Blue Orca continued.

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