Investors in Oatly Group (NASDAQ:OTLY) and OTLY stock certainly have a lot to be thankful for today. Indeed, shares of this big name in plant-based food products have recovered approximately 9% of their losses today.
Since its peak in June, OTLY stock has roughly halved. The sort of downside pressure on Oatly stock we’ve seen of late is typically reserved for meme stocks and those with some serious concerns. Such has been the case with Oatly.
The company has been under pressure from short sellers for a number of reasons recently. This has led to a sharp increase in the company’s short interest ratio.
First, Spruce Point Management has asserted that Oatly’s accounting practices are suspect. This short-seller has alleged that Oatly has overstated its top- and bottom-line performance. According to a review of the company’s books, Spruce Point believes Oatly could have overstated its revenues by double. Additionally, various potential “accounting shenanigans” led to red flags with this stock.
Secondly, Spruce Point believes that Oatly has been greenwashing its investors. In other words, the company is purportedly providing a misleading view on how sustainable its products actually are. Among the items of concern for Spruce Point is the water consumption required to produce one gallon of oat milk versus cow’s milk. This has become a point of contention among sustainability-oriented investors.
Oatly has explicitly denied these allegations, calling the report “false and misleading.” However, investors appear to have been spooked enough by this report to result in a halving of OTLY stock in recent months.
Let’s dive into what’s behind today’s reversal for Oatly investors.
OTLY Stock Higher on Supply Update
In addition to this high-profile short report, investors have also been concerned with Oatly’s ability to meet surging demand. According to recent reports, the company is only able to fill around 70% of its orders. Accordingly, large customers like Starbucks (NASDAQ:SBUX) have sought other suppliers to fill its growing demand of late.
Today, Oatly’s CEO touted the company’s plans to address these concerns, among other concerns (including the sustainability issue). Oatly has committed to using much of the $1.4 billion it raised during its initial public offering (IPO) to build new production plants around the world. Additionally, the company is focusing on reducing its water consumption at these plants. The company reports reductions of 60% in terms of water usage on this front.
These updates are encouraging. Indeed, investors will likely be battling short-term headwinds in some shape or form for some time. However, Oatly appears to be a company that’s investing in all the right places right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
