This analysis was first published in SvD Näringsliv, in Swedish, on October 3rd, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.
Viceroy Research’s short bet against Truecaller signals a new era for Swedish tech companies. Financial actors actively looking for opportunities to sink them is the kind of challenge many newcomers have never faced.
A lot can happen in 18 months.
During the spring and summer of 2021 sentiment was still hot and IPOs followed one another in quick succession. Barely a year and a half later we are in the diametrically opposite position. Tech companies have crashed all over the world — in many cases losing well over 50 percent in value.
Now comes the next blow.
Short sellers have started taking positions in Swedish tech companies and are pushing their agenda as activists to drive them down further. When momentum has turned, it is easier than ever to push the price of individual companies lower.
The latest example came last week, when Viceroy Research announced that they had taken a short position in app company Truecaller. On Twitter they described the company as follows:
“Truecaller is a Swedish ad and spyware app powered by a public phonebook that purports to prevent spam (not a joke).”
Not mincing words. In a 29-page document, Viceroy Research goes through what they argue is Truecaller’s breach of GDPR and a long list of other objections. Truecaller has responded to the claims and called them “incorrect and false”.
Frequent readers of the business press may recognise the name Viceroy Research. It is the same firm that last winter accused Ilija Batljan’s real estate company SBB of being “uninvestable”. This has led to a long-running conflict that has probably consumed a great deal of time and energy from both sides. In SBB’s case too, the criticism came at a point when the share price had started to move downward, and it has fallen sharply since.
Tech company Sinch ran into something similar this summer. The firm Ningi Research shorted them while accusing their financial reporting of being misleading by billions. Sinch shortly afterwards changed the way they report, and dismissed their CEO.
Shorting, as is well known, means speculating on falling share prices, something that is hard to do when stocks only go up. As long as the market valued growth highly, plenty of companies had a strong share price regardless of what their fundamentals looked like. Now that the market has turned, earlier lofty valuations add extra fuel for the short sellers.
In several cases it has been enough for them to argue that the company is overvalued. When they then make their case public, it has been an effective way to accelerate the move downward. Something both Truecaller and Sinch have now experienced.
The events show a new kind of challenge and phase for listed tech companies. The fall from the record levels of recent years is high — and there is money to be made on it.
For newly listed companies — or for retail investors following tech companies — a set of situations has emerged that we have not seen in many years in the tech world. When the Japanese super-fund SoftBank previously invested in companies, the world’s eyes turned to them. It was seen as a stamp of strength, and often came with high valuations. SoftBank was the investor that set Klarna’s highest valuation to date at $46 billion.
Now the situation is suddenly reversed. When SoftBank recently announced they had sold their stake in Sinch — Sinch’s share price went up instead. The market treated SoftBank as a risk rather than the mark of quality you might have got 18 months earlier.
The challenges are many for tech companies on the stock market right now. The market’s wish for growth has been swapped out for profitability. Share prices are under pressure and have fallen sharply, which makes staff option programmes worthless. And on top of that now come short sellers who profit from pushing this down further. Newcomers on the stock market look set for a rough ride ahead.
