By Nell Mackenzie
(Reuters) -Hedge fund Muddy Waters (NYSE:) is short in payment processing company dlocal, the investment firm’s CEO and owner Carson Block told a financial conference on Wednesday.
Block told attendees at the Sohn Conference in London that he entered his short position because of the many “red flags” he found in the most recent accounts which were last filed in 2020 by Dlocal Ltd, an Uruguay-based company, which says is meant to connect global merchants with emerging market users through payments.
“If these were serious people who really wanted to run a payments company for the long term, they wouldn’t have sold a billion dollars worth of the stock in the first five months of the company going public,” said Block in an investor presentation.
Dlocal did not respond to a LinkedIn request to comment. Contact links on the company website were not working at the time of writing.
A report released by Muddy Waters Research on its website alleges there is a $3.3 million deficit in DLO’s ability to fund its dividend.
It also says in the company’s Malta subsidiary there is a $4.1 million deficit in the company’s ability to fund its cash uses.
“A spate of recent high-level departures brings to mind the idiom, ‘rats fleeing a sinking ship,'” says the report.
Block’s most recent research report came out in July 2022 was in energy company Hannon Armstrong (NYSE:) Sustainable Infrastructure Capital HASI.N.
The move comes as Muddy Waters’ founder Carson Block is being probed by the Justice Department as part of a wide-ranging investigation into short-sellers and hedge funds focused on suspected coordinated manipulative trading.