(Bloomberg) — Sinch AB shares plunged for a second day, earlier erasing as much as $1.3 billion of market value, as the Swedish cloud-based platform provider warned that a “reassessment” of certain historical costs will hit second-quarter profit.
The stock fell as much as 25% in Stockholm, extending a 28% drop on Monday which traders had attributed to a tweet on Sinch’s financial statements from an account called Ningi Research. By 2:20 p.m. in Stockholm the shares had staged a partial recovery and were quoted down 7%.
The company said Tuesday that the reassessment of cost of goods sold for past periods will negatively affect second-quarter earnings by 162 million Swedish kronor ($15.3 million). It said it decided to issue a statement in light of “the unusually strong share price movement” on Monday, even though remaining parts of the results have not yet been finalized ahead of their July 21 release.
“Whilst the third-party analysis does not discuss reassessment of cost of goods sold, the analysis claims that revenues for 2021 are overstated, which is something that Sinch strongly opposes,” the company said in the statement.
Ningi Research didn’t respond to a request for comment.
The reassessment “is clearly an operating failure in certain parts of the organization,” Chief Executive Officer Oscar Werner said on a conference call. During the call he also also made promises to shareholders that the company would work to rectify the problem.
Describing Sinch’s statement as a “profit warning,” Svenska Handelsbanken AB analyst Daniel Djurberg said that while uncertainty is high, that should be fully discounted in the stock price by now.
Hedge fund short sellers have been targeting Sinch this year, betting on a drop in the shares. The stock is currently one of the most shorted in Europe, with 20% of the company’s free float out on loan, according to according to IHS Markit data.
(Updates share price, adds CEO comment and shorting data.)
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