Issuing a short report about a publicly traded company is something the CEO of that company will likely remember. Ecommerce company Shopify Inc SHOP is one of the companies that has been targeted by famed short-seller Citron Research over the years, something its CEO hasn’t forgotten.
Citron Vs. Etsy: In its latest short report, Citron Research focused on ecommerce platform Etsy Inc ETSY, criticizing the company for its less-than-tough stance on counterfeit goods found on the platform.
“Etsy has become one of the largest platforms in the world for counterfeit goods, and it is indisputable,” Citron Research said.
Citron said Etsy risks trouble with the FTC, DOJ, SEC, Customs and Border Protection and the brands with stolen trademarks, the short seller alleges. Brands cited in the report included Disney, Nike, LVMH and Rolex.
“The worst part is they have allowed the culprits to buy ‘ad words’ of the brands and then labeled many of these counterfeiters as trusted websites.”
Citron called the counterfeit issues a “new low as a public company” for Etsy and alleged that management has knowledge it is happening and doesn’t seem to care.
One of the tweets by Citron since the Etsy short report also targeted how Etsy is promoting counterfeits of Apple Inc AAPL products.
“Before frequency, they should worry about legality and integrity. Even messing with $AAPL. Are these homemade goods, or are they Chinese counterfeits? This store sold 32k iPhone cases advertised ‘with logo.’”
Shopify Sides With Etsy: Shopify CEO Tobi Lutke joined the fight with a tweet taking on Citron Research and its CEO Andrew Left.
"Oh look. This troll Andrew Left crawled out of the dredges of the internet again to s*** all over another great company for a quick buck. How is this legal," Lutke tweeted, while sharing an article about Etsy shares falling on a short report from Citron.
Citron responded to the comment by Lutke in what could be a battle between the Shopify CEO and Citron Research.
“Tobi, act like a CEO and a kind person, not another mean spirited namecaller. $ETSY might be a great company, but they are violating trademarks and we have thousands of examples,” Citron Research tweeted.
Related Link: Why This Etsy Analyst Expects Q4 Earnings Beat This Week
Shopify's Beef With Citron: Citron previously issued a short report on Shopify in April 2019. The short report argued that a “perfect storm” of setbacks was coming to Shopify, including increased competition.
The report cited Square, Microsoft and Instagram as companies that had launched products to take on Shopify.
Citron saw shares of Shopify going to $100 or a split-adjusted $10, versus a price of around $200 at the time, or a split-adjusted $20. Shopify shares surged higher from 2019 to 2021, as the company was one of the winners from the COVID-19 pandemic with more people shopping online from their homes, a boost to the ecommerce sector. Shopify had a 10-for-1 stock split in 2022.
“As for $SHOP it was a great company with valuation issues. Congrats on your success,” Citron Research tweeted.
Twitter user Luke Walsh called Left a “goon” and highlighted Citron’s previous call against Shopify when it was $120 per share, saying it was a $6 stock.
Lutke acknowledged the Twitter user and offered more on the battle between Citron and Shopify.
“He (Left) also said he would donate hundreds of thousands to the Robin Hood foundation if Shopify isn’t a scam. He never did. I made them whole out of pocket because screw that guy.”
Etsy told Benzinga it takes intellectual property law seriously and has many safeguards in place, when asked about the Citron claims.
“Etsy is proud to be home to millions of unique, handcrafted, and customized goods, and the integrity of our marketplace is critical to our business,” an Etsy spokesperson told Benzinga. “We are dedicated to fostering a trusted and safe platform.”
Etsy Q4 Earnings Estimates: Etsy reports fourth quarter financial results after market close Wednesday, which comes with the recent backdrop of the Citron Research short report.
Analysts are expecting the company to report revenue of $751.26 million, compared to $717.14 million in last year’s fourth quarter, according to data from Benzinga Pro. Estimates from analysts see Etsy reporting fourth-quarter earnings per share of 80 cents in the fourth quarter, compared to $1.11 in last year’s fourth quarter.
Etsy has beat revenue and earnings per share estimates in each of the prior three quarters of the fiscal year.
The recent short report could lead to questions about what Etsy is doing to address counterfeit items on its platform during the analyst question and answer segment.
ETSY Price Action: Etsy shares were up 0.61% to $125.61 on Wednesday.
Read Next: Shopify Q4 Earnings Highlights: Revenue And EPS Beats, GMV Up 13%, Q1 Guidance And More
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