Oddity shares drop 7% after short seller accusations

By Alessandro Carrara | Published: 23-May-2024

Oddity has hit back at the claims, calling the 50-page report published by Ningi Research misinformed

Oddity’s shares fell by 7% at the close of trading on 21 May after a short seller accused the company of misleading its investors.

A 50-page report released by Ningi Research claimed the consumer tech company was inflating its worth by concealing a large bricks-and-mortar business based in Israel.  

The document alleged that this stood in contrast to Oddity’s claim that it is a “pure-play digitally branded platform”.

“It is our opinion that Oddity concealed its bricks-and-mortar operations to inflate its earnings and boost its IPO valuation,” the report read. 

Ningi Research said it also took issue with the company’s profits, claiming it is generating sales through “dishonest marketing tactics”.

“In our opinion, the secret to Oddity’s digital growth is its non-cancelable subscriptions, which customers are lured into via bogus AI quizzes,” the report continued. 

“Our research indicates that customers unknowingly enter into non-cancelable plans, allowing Oddity to recognize repeat purchases in the following quarters even though the customers don’t want the product.”

Oddity has hit back at the claims in the report, calling them “demonstrable factual inaccuracies, incorrect assumptions and unfounded and malicious speculation”.

The Il Makiage owner added that its bricks-and-mortar business in Israel, made up of 43 retail stores and six beauty schools, was an “immaterial part” of the business. 

This segment of the business is said to have represented less than 5% of its net revenue and EBITDA in 2023 and Q1 2024.

Oddity said that the allegations on its “non-cancelable plans” were false, and its technology served only to “drive conversion, customer loyalty and repeat purchase rates”.

“Short sellers and competitors will not deter us from continuing to deliver the best online customer experience and to take significant market share of the beauty industry,” Oddity continued.

It comes after the consumer tech company raised its full year 2024 guidance, following a strong first quarter. 

Bolstered by an “excellent” performance from Il Makiage and Spoiled Child, revenue increased by 28% to US$212m, while profits were up 33% to $156m.

Income also soared by 82% to $38m, and Oddity has raised its FY24 guidance to be between 23% and 25% as a result.

This represents revenue growth of up to $635m for the year.

Cosmetics Business has contacted Oddity and Ningi Research for comment.

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