Remitly Global shares fall after critical Spruce Point report

Investing.com -- Shares of Remitly Global (NASDAQ: RELY) dropped 4% following the release of a critical report by Spruce Point, which raised serious concerns about the company’s customer testimonials, Trustpilot reviews, and overall financial practices. The report, which calls into question the trustworthiness and transparency of the cross-border remittance service provider, suggests that Remitly may be significantly overvalued compared to its peers.

Spruce Point’s analysis alleges that Remitly has engaged in misleading advertising by using inauthentic customer testimonials and doctored reviews on the Trustpilot platform. Trust being a crucial factor for customers using remittance services, such allegations could potentially damage the company’s reputation and customer loyalty. Furthermore, the report expresses skepticism over Remitly’s accounting, financial reporting, and governance, indicating a possible overstatement of the company’s equity growth narrative.

In addition to these concerns, the report underscores potential risks to Remitly’s business model, including uncertainties in U.S. immigration policies and the emerging displacement threat from cryptocurrencies and stablecoins. The timing of Remitly’s decision to remove "Be Transparent" from its corporate values is also questioned, especially when greater transparency is demanded.

The report goes on to highlight the company’s audit and risk oversight issues, marked by multiple executive departures and a history of material weaknesses. Spruce Point emphasizes the company’s reliance on maintaining a high perceived value of its equity, as evidenced by the aggressive issuance of stock-based compensation. According to Spruce Point, these findings could lead to a long-term downside of 40% to 55% in Remitly’s market performance.

This news comes as a significant blow to Remitly, which has been trading at a premium compared to its fintech peers, with investors previously showing confidence in its growth opportunities and competitive advantages. The report from Spruce Point challenges these views, suggesting that the optimism surrounding Remitly’s stock may be unfounded.

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