Why We Don’t Trust Celsius Holdings Inc. (Nasdaq: CELH) Portrayed Growth

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  • Celsius Holdings Inc. is a fitness beverage company that has seen its stock skyrocket in 2020 on the back of sudden and unexpected revenue growth
  • Investors have been led on by strong sales trends driving sky-high expectations for the future, though our analysis shows Europe, a substantial portion of the business, is not nearly as good as it looks, with far lower and potentially negative sequential growth across Q3-2019 to Q2-2020.
  • We find Celsius’ acquisition of their Nordic distributor Func Foods concerning, and urge investors to question why management would commit resources to a non-core business approaching insolvency with a poor track record of successfully growing brands, serving a geography with declining sales
  • Our search for a rationale revealed what appears to us to be several troublesome factors indicating Func may have been used for sales manipulation and/or channel stuffing. We highlight rising payables, beneficial distribution terms, and strong hints at Multi-Level-Marketing Activities.
  • It is not surprising these concerns have not been addressed, as Celsius’ auditor Assurance Dimensions has a far from stellar track record and in our view seems ill-equipped to spot misrepresentations.
  • Celsius has also rightfully come under scrutiny for misleading advertising. We believe the company carefully walks the line with the health benefit claims of its products, backed by self -funded scientific studies, and that the recent rise in sales will bring additional regulatory scrutiny to the brand, an under-represented risk.
  • There are key individuals with worrying backgrounds that seem largely unknown to investors. We believe Celsius’s key shareholder Carl DeSantis has a checkered history of what appears to be fraudulent behavior. Particularly concerning, we believe Carl DeSantis is really the mastermind behind the company.
  • An executive member of Celsius’ initial Nordic Distributor People’s Choice (acquired by Func Foods) is linked to the “Panama Papers”.
  • Current shareholders are selling large portions of shares. Investors who participated in the 2020 Private Placement immediately offered an on-shelf prospectus to dump their shares. We see lack of confidence in their own stock.
  • Given the risks noted in this report, we believe investors should exercise caution when thinking about the growth that (judging by market valuation) is assumed to be a foregone conclusion. Combine this with the apparent fraudulent track record of key individuals and an auditor who seems ill-equipped to detect fraud, and you have yourself a perfect set up for a bad awakening. We see the stock declining to a price target of $9.99 and potentially much lower.

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