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Investing.com -- Shares of Abacus Life (NASDAQ:ABL) fell 10% following a critical report from short seller Morpheus Research, which cast doubts on the company’s asset valuation practices. The report, resulting from a three-month investigation, suggests that Abacus Life’s significant returns may be largely due to an opaque accounting scheme.
Abacus Life, known for purchasing life insurance policies from seniors, has been a familiar name in American households, with an estimated 25% of Americans exposed to their commercials. Despite its visibility and a recent public offering in July 2023 through a SPAC deal, Morpheus Research’s findings have raised serious questions about the legitimacy of its business model.
The short seller’s investigation involved reviewing litigation filings, corporate records, and interviews with over 30 industry experts, including competitors, brokers, fund managers, and former employees. The report alleges that Abacus Life’s attractive returns are "too good to be true" and accuses the company of systematically overvaluing its life settlement assets through a "mark to model" accounting approach, drawing parallels to past industry scandals.
This news comes as a significant blow to Abacus Life, which has been operating since 2004 and had gained a market cap of $740 million. The company’s association with high-profile names, such as Terry Pegula, owner of the Buffalo Bills and Buffalo Sabres, who sponsored their SPAC deal, adds to the gravity of the accusations.
Investors reacted negatively to the revelations, prompting a sharp decline in Abacus Life’s stock price. The report’s impact underscores the importance of transparency and integrity in financial reporting, especially for companies like Abacus Life that operate in the niche market of life settlements.
As the market absorbs the details of the Morpheus Research report, it remains to be seen how Abacus Life will address these allegations and whether their business practices will undergo scrutiny or regulatory action.
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