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Lightspeed Commerce Inc. shares were the biggest losers on the TSX Wednesday after a short-seller expressed doubts about the company’s customer counts, revenue growth, and competitive position.

The company’s stock dipped 11.7 per cent, to $126, wiping out more than $2-billion in market capitalization.

The Montreal-based company is a seller of point-of-sale systems for retailers and restaurants, but has been making a push into e-commerce with a series of expensive acquisitions. At its 52-week high last week, the company’s stock had quadrupled from its 52-week low.

It’s the latest Canadian target for New York-based Spruce Point Capital Management. Spruce Point stands to profit if investors accept its thesis that Lightspeed faces a potentially large share-price decline. Short-selling shares is a bet that shares will drop, with an investor borrowing shares, selling them, and repaying the loan by returning new shares, hopefully bought at a lower price.

Several of its short sales have worked out, including a spectacular collapse at Maxar Technologies Inc. in 2018. However, several of its recent shorts - Dollarama Inc., Canadian Tire Ltd. and GFL Industries Inc. - have been duds, as they’ve all outperformed the S&P/TSX Composite Index since the publication of Spruce Point reports.

Spruce Point CEO Ben Axler declined to say how large the firm’s short position is, citing company policy and the lack of any regulation requiring he do so.

In a statement Wednesday evening, Lightspeed said the report “contains numerous important inaccuracies and mischaracterizations, which Lightspeed believes are misleading and clearly intended to benefit Spruce Point.” It urged investors to “consult credible sources,” including the company’s own securities filings, before making investment decisions.

In its 125-page report, Spruce Point collected many statements from Lightspeed, dating back to its days as a private company, and highlighted what it saw as inconsistencies and gaps in disclosures about the number of customers Lightspeed has had, what its potential market is, and how much revenue it’s getting from each customer.

Spruce Point believes Lightspeed’s core point-of-sale system product isn’t growing as fast as the company suggests, and recent, expensive acquisitions have obscured that. It also questions how Lightspeed showed stable revenue figures during COVID-19 when similar companies reported double-digit sales declines.

By expanding into e-commerce and payments products, Lightspeed will run headlong into juggernaut Shopify Inc. and even Amazon Inc. - and lose, Spruce Point believes.

Spruce Point says investors who have bought recently at share prices that are at valuations as high as 25 times estimated 2022 sales, and 50 times 2022 estimate gross profit margins, “are failing to see the titanic competitive shifts happening in its business and industry ... once investors come to grips with reality and reassess the quality of its business, [Lightspeed’s] share price could decline by 60 percent to 80 per cent.”

In its Wednesday-night response, Lightspeed said it is “confident in its governance, financial reporting and business practices” and “has consistently delivered revenue growth” since its March 2019 initial public offering. It reiterated its reported sales figures: in the most recent quarter, Lightspeed said, revenue increased 220 per cent from the prior year, with organic revenue – unaided by the acquisitions – up 78 per cent.

In a note Wednesday, National Bank of Canada analyst Richard Tse, who has an “outperform” rating on the stock, said “no doubt, we need to take these reports seriously; and given its length (125 pages) we’re still reviewing it. That said ... nothing we’ve seen thus far requires a change in our investment thesis.”

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