LSPD Comments on Short Seller Report

Hot off the press……



This seems like a non-reply reply to me. I would have preferred they respond to specific allegations that Spruce Point. They may still do so as I don’t think LSPD management should have completely dismissed the report.

I feel that 80% of the points in the Spruce Point report are irrelevant or grasping at straws. The list is too long to go through. But a few examples such as -

“they are sandbagging their guidance” - Every SaaS company does that
“Shopify and Amazon see LSPD as competition” - That’s a reality of business competition. I see this as good, not bad, as it mean LSPD has gotten necessary traction to be on Shopify’s radar
“Insider ownership decreased from 54% at IPO to 26%” - IPO’s are going to dilute shareholders, and nearly all hypergrowth companies experiencing large increases in share prices are going to see insiders sell off part of their stakes to de-risk
“they have a clawback policy” - isn’t this an indication of good corporate governance rather than bad? Would have been nice if all the banks in 2008 had these clauses included
“customer counts went from 50k → 27k” - While Spruce Point convincingly argues that their end-2018 customer count was 27k and not 50k as on LSPD’s website (later corrected to “Customer Locations”) this seems like a careless mistake on LSPD and not an indication of anything more sinister

The list of weak arguments goes on and on…

BUT, I feel there are some points that I think have some merit and am wrestling with internally -

  1. ARPU - It does look like ARPU really is decreasing and has been decreasing for a number of years even before Covid hit. While SQ doesn’t disclose ARPU either the percentage of large GPV sellers has increased from 57% to 65%. Not sure if what LSPD’s numbers look like and it would be nice to have this transparency

  2. GTV - Not sure how this is being calculated. Spruce Point has a quote from a former employee about transactions not being verified…I’m not sure if this is the norm when calculating GPV?

No position in LSPD but considering an entry


I think LSPD handled this perfectly. It was a vicious, borderline smear, a laundry list of ugly accusations clearly designed to drive the stock price down. If someone lists 50 terrible things and a few have merit you don’t validate all the claims by addressing each one.

Lightspeed’s response was perfect - dismiss the attack as quickly as possible as some response was required but do not add fuel to the fire. Any response would make them seem defensive, guilty, worried and make the attack seem more credible.

The silver lining in this is to me it showed strong, confident leadership. Say the minimum necessary and don’t let emotions, anger run wild. Win in the end with execution.



I would like a more thorough reply from Lightspeed. This short seller actually tagged the SEC in its tweet about the “improprieties.” This is not merely about the numbers. This is about malfeasance. And that can scare away customers.

I think they need to refute what’s out there and have their accounting firm back them up. Obviously, there were a lot of heavyweight underwriters on the IPO (Morgan Stanley, BofA, Barclays etc…) and to say they ALL didn’t do their due diligence is pretty hard to believe. It happens, but it would be rare.

I know the managers on the board don’t want this short report addressed here, but this kind of accusation could leak into the acquisition of new clients. So it’s relevant not just to the current stock price, but to the future. One of the analysts covering the stock didn’t dismiss the report, either. They said they were looking into it and so far haven’t seen anything that would change their investment thesis. That’s what I’d expect, but they’re legitimizing it by saying they’re taking it seriously.



I don’t think it’s going to be the first time that the SEC is tagged on Twitter to add credence to somebody’s post. Twitter has a much lower factual requirement than say a regulatory panel. I think the stock will recover quickly enough as the company continues to execute. The strong investment thesis and analysis discussed here over the past months is not invalidated because a short seller has fired a sensational hit piece, even if the timing was fortunate with sentiment in the market being so low these past few days



Oh, I understand that tagging SEC is just a cute ploy. My concern is that a new customer may read that report and wonder if it’s worth getting involved with a company that may have legal issues, true or not. That’s why it may be a good idea to swat them away with facts other than ignoring them.

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