Lightspeed Commerce, Inc.

After conducting a forensic financial and accounting review, Spruce Point believes shares of Lightspeed Commerce Inc. (TSX/NYSE: LSPD), a cash degenerative North American roll-up of point-of-sale commerce solutions, has covered up massive inflation of its Total Addressable Market (TAM), customer counts, and Gross Transaction Volume (GTV). In addition, Spruce Point believes LSPD is covering up increasing competitive pressures and double digit organic declines in its business with a flurry of acquisitions. Given numerous changes to the definition of its Average Revenue Per User (ARPU), its resilience to revenue loss and improvement in DSOs during peak COVID-19 while its restaurant and retail clients were pressured, and subtle accounting changes, we question LSPD’s revenue quality. Initially it guided investors to its cash from operations (CFO) as the best way to measure its performance, and then quietly suspended guidance. Based on employee interviews, we believe its ARPU has actually been declining, not all acquisitions have been successful, and it appears LSPD is gaming its goodwill testing to avoid impairment. LSPD baits investors with its massive potential in its payments solution, but we believe it has not been transparent about competitive pressures and material margin decline. Now a $17 billion company, we believe LSPD is crowding into Shopify’s space, and will be forced to compete head-to-head with it, and new entrants such as Amazon. We believe LSPD will lose the battle and its astronomical 23x 2022E sales multiple will contract. We see 60%-80% downside risk to ($22.50 – $45.00 per share)

Evidence Shows Lightspeed Massively Inflated Its Business Pre-IPO

Evidence of Slowing (And Declining) Organic Growth And Business Deterioration Through IPO

Questionable CFO Tied To a Prior Technology Scandal Brought In Pre-IPO

Pivot To Acquisitions And Wildly Overpay When Growth Stalls?

Evidence of Aggressive Revenue Reporting

Troubles With Lightspeed Payments, The Highly Promoted Upside Opportunity

Weak Governance Standards

Worrisome Auditing Oversight

Poor Risk / Reward

Insiders Cashing Out

Analyst Have Poor Track Record Modeling Results

LSPD May Be Sandbagging Guidance

Analysts and Market Data Providers Mismodel Ent Value By >$1.0bn

Inflated Valuation With 60% – 80% Downside Potential

Insider ownership has been in rapid decline post-IPO, in part from both insider selling and stock dilution for acquisitions. At IPO insiders owned 54%, but now own just 26% on a pro forma basis.

We believe investors buying LSPD at 23x and 47x 2022E sales and gross profit are failing to see the titanic competitive shifts happening in its business and industry. Given its changing market dynamics towards greater ecommerce, we believe it will increasingly compete against industry stalwart Shopify, and new entrants such as Amazon. We expect LSPD to fail as its ecommerce and omnichannel capabilities greatly lag peers. Once investors come to grips with reality and reassess the quality of its business, LSPD’s share price could decline by 60% – 80% ($22.50 – $47.00 per share).

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