Skillz Stock Slump Reaches Epic Proportion as Another Bear Report Emerges

Posted on: April 20, 2021, 12:18h. 

Last updated on: June 23, 2021, 01:42h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Skillz (NYSE:SKLZ) stock is getting pounded again today after another bearish research report surfaced on social media – this one alleging the company is using accounting gimmickry to overstate the health and size of its business.

Skillz stock
Skillz CEO Andrew Paradise. The stock is getting slammed by another bearish research report. (Image: Flipboard)

In late trading, shares of the mobile games developer are off more than 11 percent, extending a slide that’s seen the name shed a staggering 47.25 percent over the past month. In a piece posted to Twitter yesterday, a user known as Eagle Eye Research claimed cash revenue represented 29 percent to 47 percent of Skillz’s generally accepted accounting principles (GAAP) sales over the past three years, promising to “deconstruct this accounting sleight-of-hand over the next few days.”

We believe the company likely recognizes substantial non-cash revenue, and believe that cash revenue may be less than half of GAAP revenue,” said Eagle Eye in its report. “The company has never turned a profit and we doubt it ever will.”

This is the third time in barely more than a month that bearish research surfaced on Skillz, which has been a stand-alone public entity just five months following a merger with a special purpose acquisition company (SPAC).

Tumultuous Times for Skillz Stock

Wolfpack Research got the bear attack on Skillz rolling last month, saying the “growth projections SKLZ and its SPAC sponsor continue to present to investors are entirely unrealistic.”

That was followed up by a 22-page missive from a Twitter account known as @Restrinct, who noted Skillz faces risks via a ban from the Google Play store, and that the company earns just 80 cents worth of growth for every $1 it spends on advertising.

The San Francisco-based company said those reports are littered with inaccuracies, but hasn’t publicly elaborated beyond that. In the meantime, Skillz stock is 72 percent below its high and the past month has been particularly brutal with the name faltering despite decent revenue guidance issued in late March.

A massive secondary equity sale revealed last month didn’t help matters. Skillz bears pointed out CEO Andrew Paradise sold some of his shares into that offering — a move being construed as a negative sign by those lining up against the stock.

For Eagle Eye’s part, that researcher says Skillz trades at valuation comparable to a “disruptive” cloud computing firm when it reality it’s “a subscale mobile game publisher in a competitive industry.” The operator of the Twitter account forecasts 80 percent downside for Skillz stock from current levels. Based on Monday’s close at $14.11, if that estimate is accurate, Skillz would trade below $3.

Internet Defending Skillz

In today’s era of highly empowered retail investors, some are attempting to leverage social media to support Skillz stock. Critics of the Eagle Eye report aren’t taking it idly, with one Twitter user saying the research is no more than assistance for hedge funds that are short the stock. Another slammed the newness of the Eagle Eye Twitter handle.

Others are speculating, given that one of Eagle Eye’s first Twitter follows was Wolfpack Research, that the firms are in cahoots with each other, or that the social media accounts are operated by the same person.

Confirmation on the conjecture remains to be seen. but with Skillz stock needing to nearly quadruple to get back to prior highs, it’s clear bears have the upper hand for now.