DoubleVerify Holdings Inc (NYSE:DV) shares dropped more than 6% Tuesday after Spruce Point Capital released a short report on the stock, stating it sees a potential 35% to 45% downside risk in the shares.
The firm said it has "grave concerns" about the accuracy of DV's financial reporting to investors, the efficacy of its product suite, and the sustainability of its growth story.
Spruce Point believes its evidence "points to potentially manipulative and deceptive financial reporting and accounting practices" around DV's international business.
"Our research indicates that DV will have increasing difficulty in combating slowing customer growth and margin pressures, thereby jeopardizing its ability to meet lofty Street expectations and preserve its industry-leading valuation multiple," wrote Spruce Point.
Furthermore, the short-selling firm claims insiders at DV have "orchestrated a brazen scheme to artificially inflate DV's share price by selling and obscuring an international growth narrative that is failing while they rapidly unload stock."
Spruce Point said it analyzed DV's global locations listed on its website and found that it "frequently changes addresses and has closed more physical locations than opened."
"Notably, it no longer has a listed address in the technology hub of San Francisco and shuttered offices in Latin America."
Other issues highlighted by Spruce Point include "an indefensible product," market saturation, challenges growing customers, and an overstated TAM.