Spruce Point releases e.l.f. Beauty, Inc. short report, sees potential 65% downside

Spruce Point Capital said in a report Thursday that it sees a potential 45% to 65% downside in e.l.f. Beauty, Inc. (NYSE:) shares.

The firm said it has “grave concerns” about ELF’s continuing brand equity due to its business relationship with marketing firm Movers+Shakers. They allege the marketing company has “ties to the notorious NXIVM cult.”

ELF shares initially dipped following the report but are now up 2.4% from Wednesday’s close, trading back above the $100 per share level

“Brand integrity is critically important to ELF and customer concentration presents a material risk,” said Spruce Point.

The short-seller added that they believe that to salvage its brand equity, ELF may need to undertake a “new and expensive creative re-branding strategy to restore the public’s confidence.”