Debra Borchardt
Agrify Corp. (NASDAQ: AGFY) stock dropped by 20% on news that short seller Bonitas Research, released a report alleging multiple problems with Agrify. The allegations in the report stated, “We believe that Agrify created artificial demand for its product by financing undisclosed company insiders to act as independent customers.”
In response an Agrify spokesperson said, “The short seller’s report is inaccurate, ill-informed and motivated by their own financial interests. It will not deter us from our mission.”
Further stating, “after its January 2021 IPO, Agrify’s shares soared amongst a wave of sales announcements to alleged independent third party licensed commercial growers via new total turnkey partnerships (‘TTK Partnerships’).” The report added, “the TTK Partnerships use Agrify’s balance sheet to finance the construction of the customer’s facility, equipment sales and installations, which suggests to us that Agrify’s recorded revenues are artificially inflated by loan balances from Agrify to TTK Partnership customers.”
According to the company’s website, Bonitas claims that it “found the majority of Agrify’s TTK Partnerships are either with undisclosed Company insiders or with unlicensed unproven operators.”
It went on to write, “The TTK Partnerships use Agrify’s balance sheet to finance the construction of the customer’s facility, equipment sales and installations, which suggests to us that Agrify’s recorded revenues are artificially inflated by loan balances from Agrify to TTK Partnership customers. Agrify accounted for its TTK Partnerships differently than previously disclosed accounting policies.”
Bonitas added, “TTK Partnerships were never mentioned in the Company’s S-1 or its 2020 10-K, which means Agrify’s new 2021 accounting policies have yet to be the subject of an audit.”
“Given evidence of limited interest from independent customers and significant cash dealings with undisclosed Company insiders, we think that Agrify’s auditor Marcum, LLP (“Marcum”) cannot in good faith accept Agrify’s 3Q’21 financial statements as-is without inviting increased scrutiny on itself for violating negligence rules of its PCAOB membership.”
“We suspect Agrify’s actual revenues are significantly less than what is reported to investors which is why we are short Agrify and think that its stock is going lower.”
