3 stocks that recovered after the short-seller attack
Recently, short-sellers have been gaining more and more attention. They are investors who bet on a decline in stock values and often issue reports full of criticism of the companies they have bet on. These reports can have varying degrees of veracity and sometimes lead to a significant drop in share value. Although the short-term effects are usually felt, many companies recover from these attacks and their shares can rebound.
That's why today we look at three companies in the technology sector that were targeted by short-sellers but managed to bounce back.
Roblox Corp. $RBLX
Roblox, a popular online gaming platform, was the target of an October 2024 report from well-known firm Hindenburg Research. The latter accused the company of overstating the number of daily active users (DAUs), which was allegedly intended to mislead investors and artificially inflate the stock's value. The report claimed that some users were managing multiple accounts, misrepresenting the actual number of real people on the platform. In addition, it highlighted safety issues for children.
Roblox shares plummeted after the report was published, but recovered within a day and even surpassed the price before the attack. The company issued a statement denying the allegations, and investors reacted positively, leading to a quick return of confidence.
Block Inc. $SQ
Block Inc, known for its CashApp platform, came into the crosshairs of Hindenburg Research in March 2023. A report accused the company of having its app used by criminal elements to launder money. Hindenburg suggested that Block inflates its user statistics to boost stock value and allow insiders to sell shares at a high profit.
The market's reaction was immediate, with the stock plunging nearly 15%. Yet within days, Block Inc. stock began to recover and later reached levels higher than it had before the report. The company rejected the allegations and gradually restored investor confidence, although it remains under scrutiny by regulators.
Super Micro Computer $SMCI
Super Micro, a server maker focused on artificial intelligence, was the target of another report from Hindenburg Research in August 2024. The latter accused the company of accounting irregularities and said it had evidence of artificially inflated sales and profits. Hindenburg drew on an earlier case in which Super Micro paid a $17.5 million fine in 2020 for improperly recognizing revenue.
Despite denying the allegations, the company announced a delay in filing its annual financial report (10-K) a day later, which led to a further drop in the stock. Despite this, Super Micro managed to recover, and its stock has since traded above its post-fall value.
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Source: Investing.com