According to an explosive report by a short seller, Oatly is allegedly deceiving its investors by overstating revenues and profits while losing market share.
According to the Wednesday report from Spruce Point Capital Management, the Swedish maker of oat-based milk substitutes — which listed its shares on the Nasdaq in a splashy May debut that valued it at more than $12 billion — has also been “greenwashing,” or misleading customers about its sustainability practices.
Oatly is accused of using shady accounting methods — “We believe Oatly has misstated revenues” — and its chief financial officer and audit committee chair have previously been involved in corporate accounting scandals, according to the lawsuit.
According to the report, the 25-year-old company has “plowed through” three auditors in six years, a fact it does not disclose in its investment prospectus.
Oatly shares were down 2.1 percent at $20.67, after falling as much as 7% in early Wednesday trades.
“The company is aware that a short seller is making false and misleading claims regarding the company,” an Oatly spokesman said in a statement. “This short seller stands to financially benefit from a decline in Oatly’s stock price caused by these false reports. Oatly rejects all these false claims by the short seller and stands behind all activities and financial reporting.”
Oatly, which is available at Walmart, Target, Trader Joe’s, and Whole Foods, costs about $5 for half a gallon, or nearly double the price of regular milk. It’s also available at major coffee shops like Starbucks. It first appeared in the United States around five years ago, when plant-based milk substitutes were gaining popularity.
Oprah Winfrey, Natalie Portman, Jay-entertainment Z’s agency, and former Starbucks CEO Howard Schultz were among the high-profile backers for Oatly last year, with a group led by Blackstone Group investing more than $200 million.
Oatly is also notable for its unconventional marketing. At this year’s Super Bowl, the company debuted a memorable low-budget commercial that featured Oatly CEO Toni Petersson sitting at a piano in the middle of a field singing, “Wow!” Wow! No Cow!”
Spruce Point also accuses Oatly of misinforming the public about its sustainability initiatives, citing a facility in New Jersey that is out of compliance with the Environmental Protection Agency and emits high levels of waste water.
“Our FOIA uncovered that location was inspected by local environmental health experts and cited for excessive trash dumping,” Spruce Point claims. “In our discussion with former employees, we learned that Oatly has struggled with logistics and high shipping costs. As noted, transportation costs are a big driver of Oatly’s climate impact.”
Oatly is also losing market share, according to the investment firm, as newer competitors enter the market and its formula is easily replicated.
“We believe Oatly overstates the proprietary nature of its business, and that in the long-run, any such advantages will be competed away. At the core, oat milk is made from oats, water, enzymes and flavoring ingredients.”
The investment firm has placed a bet against Oatly stock, which will pay off if the stock drops. Spruce Point’s report is based on interviews with a number of former employees, confidential company reports, and data obtained through freedom of information requests, according to the company.
