What impact can words have on a stock’s price? When it comes to DLocal Limited (NASDAQ:DLO), there’s a war of words happening now, and DLO stock is falling fast. Muddy Waters Capital issued some harsh words about DLocal and revealed a short position, which is causing anxiety among some financial traders.
DLocal Limited is a payments platform located in Uruguay. It’s backed by financiers such as General Atlantic and Tiger Global. Muddy Waters, meanwhile, is a well-known Texas-based short seller.
Muddy Waters has unapologetically taken a position against DLocal Limited. The short-selling firm called DLocal “likely a fraud,” and Muddy Waters Chief Investment Officer Carson Block told the Financial Times that DLocal has an “unnecessarily complex” corporate structure.
Block further claimed that there’s “inconsistent disclosure around the value of payments completed” through the DLocal platform. Moreover, Block reportedly questioned DLocal’s “disclosures around loans made to executives to exercise share options.”
What’s Happening With DLO Stock?
Early in today’s trading session, DLO stock sank as much as 12% in response to the Muddy Waters short position. However, the share price recovered somewhat.
It’s understandable that DLocal’s investors are feeling anxious. After all, Muddy Waters’ report had some scathing allegations, including this: “DLO strikes us as being unduly complex, having poor controls including an over-reliance on manual processes, deficiently governed, and a regulatory arbitrageur.”
DLocal Limited isn’t taking Muddy Waters’ accusations lying down. DLocal fired back, asserting that Muddy Waters’ short report “contains numerous inaccurate statements, groundless claims and speculation.”
This wasn’t DLocal Limited’s full response to Muddy Waters, however. Dlocal declared that it “will rebut the allegations in the appropriate forum in due course.”
What will the rebuttal be? And will it be enough to clear DLocal’s name? That remains to be seen, and DLO stock traders should keep an eye out for further developments in this ongoing story.
On the date of publication, David Moadel 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.