elf Beauty Stock Draws Strong Retail Favor After Firm Says Short-Seller Allegations Relying Upon ‘Incomplete Data And Flawed Assumptions’

elf Beauty Inc ($ELF) shares were up over 2% on Thursday morning after the company refuted allegations by Muddy Waters Research founder Carson Block saying the short-seller’s allegations are without merit.

elf Beauty said that Muddy Waters’ latest report is an attempt to negatively impact the company’s share price for its own benefit and at the expense of all other ELF shareholders.

“Muddy Waters has made numerous inaccurate statements about e.l.f. Beauty and our business by relying upon incomplete data and flawed assumptions, omitting critical context, and presenting speculation as fact,” it said.

On Wednesday, Block reportedly said at the Sohn Conference in London that elf Beaty “seems to sell a product it does not have.”

Based on import data and referencing conversations with E.L.F. 's global shipping partners, the short-seller also claimed that the company has materially overstated revenue over the past three quarters — possibly by approximately $135 million to $190 million.

However, elf Beauty clarified that in early 2024, for competitive reasons and as permitted by applicable regulations, the company had filed a request for confidentiality with U.S. Customs and Border Protection with respect to its customs import data.

“Therefore, import data available to the public after February 6, 2024, does not include a substantial majority of our actual U.S. imports,” it said.

The company asserted that it has rigorous inventory control procedures, including regular physical and cycle counts across its global distribution network. “Similarly, we have rigorous controls and procedures around revenue recognition. We are fully confident in our financial statements,” it added.

Despite the firm’s argument against the short-seller’s report, retail sentiment on Stocktwits inched lower into the ‘extremely bearish’ territory (11/100) from ‘bullish’ a day ago, accompanied by ‘extremely high’ retail chatter.

elf Beauty’s Sentiment Meter and Message Volume as of 9:36 a.m. ET on Nov. 21, 2024 | Source: Stocktwits

Despite the prevailing pessimism, some retail investors on Stocktwits expressed optimism on the stock’s potential in the coming times.