What’s the big deal about Lightspeed Commerce shares?

Jonathan Smith looks at the strong gains in Lightspeed Commerce shares since the IPO, but also the recent bearish report published.

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Lightspeed Commerce (NYSE:LSPD) is a Canadian technology company. Since going public back in early 2019 at US$16 a share, the price has rocketed higher. Over the past year, Lightspeed Commerce shares are up 124%. From the IPO level, investors would be up almost 500% in just a few years. As a UK-based investor, should I get involved?

The backstory

Lightspeed Commerce is an e-commerce software provider. It offers a broad range of software, ranging from accounting, marketing, point-of-sale and analytic tools. This makes it easy for a business to sign up and benefit from multiple different products from the same provider.

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The company concept isn’t something particularly new. Yet I think the fact that it’s seen as a one-stop-shop for businesses makes it appealing for investors. 

So far, Lightspeed Commerce shares have benefited from the firm’s strong financial results. Back in August, the results for the second quarter showed very strong year-on-year growth. Total revenue came in at US$115.9m, up 220% versus the same period last year. Like many technology companies that are trying to reach scale, it did post a loss. But the adjusted net loss of US$6.9m was a slight improvement on the previous year.

A short-term crash

With all of this growth, the company has been in the news recently for the wrong reasons. In late September, Lightspeed Commerce shares fell by 14% at one point during a day. The main reason for this crash was the release of a negative report from fund manager Spruce Point Capital. 

The report was made after “conducting a forensic financial and accounting review”, the company stated. Some damning conclusions were that the company massively overstated the business pre-IPO, as well as having a “questionable CFO tied to a prior technology scandal”.

As a result, Spruce Point Capital thinks Lightspeed Commerce shares could fall by 60%-80% in value over the long term.

Bearish reports from funds that will benefit if the share price falls aren’t new. I recently wrote about another stock dropping from a similar bearish report. From my point of view, just because the report was published doesn’t mean everything in it is true. I need to take the statements with a pinch of salt, and do my own research before deciding what to do.

Where do Lightspeed Commerce shares go from here?

Over the past five days, the share price is down 12%. It’ll be interesting to see whether the bulls or bears win out here. There’s clearly a lot of investor optimism that has driven the price higher since the IPO. The report could be a blip, with the dip an attractive buying opportunity. 

Yet if the statements in the report are well-founded, then things could unravel quickly. Either way, I think we’ll find out pretty soon. Therefore, I’d rather sit on the sidelines here and wait for more information to come out before I can make an informed decision.

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Jonathansmith1 has no position in any share mentioned. The Motley Fool UK owns shares of and has recommended Lightspeed POS Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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