Blue Orca has released a short report accusing fintech company Shift4 Payments of engaging in “a string of highly questionable and hyper-aggressive accounting manoeuvres” in response to a looming margin call. Shares in the payments company had tumbled by 12% in mid-morning trading on Wednesday after Blue Orca’s thesis hit the wire.

In the report, the activist short seller claimed the company is “a roll-up of low-tech POS systems and payment processors which is substantially less profitable, generates far less cash, and is materially more levered than investors are led to believe.”

Blue Orca speculated that the company’s CEO Jared Isaacman “faced the threat of a margin call from an unusually large series of stock pledges, creating an existential threat that he would be forced to liquidate up to 10 million shares,” which is roughly 12% of diluted shares outstanding. Blue Orca also accused the CEO of engaging in stock promotion by saying he was going to take the company private because the “stock was way too cheap” and that he was a “buyer” when he hadn’t made any open market purchases for months.

It was also alleged that Shift4’s CFO “abruptly” left the day before its Q2 2022 earnings call, amid correspondence with the SEC over its accounting, while its auditor is cited to have “warned” of a material weakness over internal financial controls the very next quarter, just as it spent $256.4 million in a string of M&A that enabled it to capitalize a material share of COGS.

“We believe that Shift4’s accounting gimmicks are enabled by a dismal corporate governance structure, including a board of directors and executive team replete with members of the CEO’s family, including his father and brother, as well as a number of his childhood friends,” claimed the short seller.

“We question whether this lack of independent checks explains why company coffers are used to pay the CEO’s private charter jet company, millions of dollars’ worth of commission pay outs to his family members, nebulous “consulting fees” to himself, and expenses tied to the promotion of his private space flight,” Blue Orca concluded.