What happened
The shorts are coming for Enviva (EVA 1.01%), and the results weren't pretty. Following the publication of a short-seller's scathing report on its business conduct and fundamentals, the wood pellet manufacturer's share price crumbled by more than 13% on Wednesday.
So what
Blue Orca, a very active and vociferous short-seller, has set its sights on Enviva. On Wednesday, it announced that it is shorting the specialty energy sector supplier, accusing it of greenwashing, among other sins.
The short-seller wrote, "We believe that Enviva is the latest ESG farce, a product of deranged European climate subsidies which incentivize the destruction of American forests so that European power companies can check a bureaucratic box."
Blue Orca accuses the company of "textbook greenwashing," saying that GPS data indicates that, in contrast to its claims, it is sourcing its wood pellets from clear-cutting (in which entire sections of forest are completely stripped of their trees).
Additionally, Enviva has "troubling cash flows, dangerous leverage, and [an] unsustainable dividend," according to Blue Orca. The short-seller feels that these factors, combined with the environmental concerns, will likely erode its stock price significantly from its current "nosebleed valuation."
Enviva has not yet formally responded to Blue Orca's allegations.
Now what
As a busy short-seller, Blue Orca sure doesn't mince words in selling its cases. It succinctly wrote of Enviva, "Ultimately, we think that any legitimate ESG investor or allocator should be embarrassed to own this stock." That argument seems to be landing with investors, who had already pushed the share price down by nearly 20% since the start of this year.
