High-flying Enphase Energy stock tumbles 24% after short-seller alleges it 'fabricated' revenue
- Enphase Energy tumbled 24% on Wednesday after a report from short-seller Prescience Point Capital Management alleged that the company "fabricated" much of its revenue.
- Enphase Energy is a high-flying solar power company that has seen its stock soar as much as 10,700% from its 2017 low of 65 cents.
- The short-seller alleged that "Enphase's regulatory filings cannot be trusted" and said it believes that up to 39% of the company's revenue is fake after it conducted its own private investigation into the company's operations.
- Additionally, the short-seller, which has a short position against Enphase, highlighted that Enphase executives have sold nearly $121 million worth of ENPH shares since the start of June.
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A high-flying stock that has soared as much as 10,700% from its 2017 low tumbled 24% on Wednesday after a short-seller issued a report that alleged the company "fabricated" much of its revenue.
Enphase Energy is a solar power company that sells a battery storage and solar power system that aims to help consumers lower their energy bills and reduce their reliance on electric utility companies, according to the company's website.
Prescience Point Capital Management, which has a short position against the company, claimed in its report that Enphase's meteoric rise over the past three years has been built upon financials that can't be trusted. The short-seller said it believes "that at least 39%, or $205.3 million, of Enphase's reported US revenue is fabricated."
Short-sellers profit if the stock they are betting against goes down.
For its report, Prescience conducted on-the-ground interviews with former Enphase employees based in India. These former employees told the firm that "a large portion of Enphase's astronomical growth over the past two years is attributable to accounting gimmicks that artificially inflate revenue and profits," Prescience said.
Additionally, Prescience Point said it received data from about 70% of Enphase's US distributors that showed much lower growth than what Enphase has reported to investors.
The short-seller also noted that since the start of June, insiders at Enphase have sold $120.9 million in stock. The insiders who sold stock include the chief financial officer, chief accounting officer, chief operating officer, chief commercial officer, and several directors at the company.
The share sales were not part of a 10b5-1 plan, which is a pre-scheduled trading plan used by corporate insiders to avoid the appearance of insider trading when they buy or sell stocks.
A request for comment from Enphase Energy was not returned in time for publication. We will update the article if we receive a response from the company.
Shares of Enphase fell as much as 24% to $39.82 in Wednesday trades. Despite today's decline, the stock is still up more than 130% over the past year.
