Shares of Oatly (OTLY), the maker of plant-dependent versions of dairy merchandise, sank on Wednesday adhering to a essential report from an activist brief-vendor raising concerns about the precision of the company’s financial statements and the robustness of its Environmental, Social, and Governance (ESG) tactics.

In a new 124-webpage report, activist brief-seller Ben Axler, the CIO and founder of Spruce Stage Cash, argues that Oatly faces “30%-70% intermediate downside chance as it fails to obtain lofty targets baked into its valuation” and a longer-time period insolvency hazard “when buyers notice that the oat-milk food trend has matured and interest in funding dollars dropping businesses wanes.”

Spruce Level Capital’s report also raises worries that investors “are not centered on various accounting and economical handle weak point which we feel have manifested in earnings and gross margin overstatement of 640bps.”

“Our fears are documented by former personnel interviews and evident indicators of projected CapEx inflation operating 77% greater than historical prices right after Oatly has churned via 3 auditors in six a long time. Buyers really should also be involved that its CFO and Audit Chair both obscure their roles at prior company accounting scandals. Oatly’s valuation has mysteriously ballooned almost 6x due to the fact a $200m investment decision by Blackstone in July 2020 regardless of our proof pointing to market place share loss. Oatly is investing at 17x ‘21E sales and 75x adjusted gross earnings and a $12bn valuation (57% of the 2025 overall projected non-dairy milk current market),” Axler wrote.

It’s Axler’s see that the company’s valuation is “unsustainable and will end improperly for new traders.” The limited-vendor also called on the board to retain the services of an impartial forensic accountant to glance into his promises outlined in the report.

A carton of Oatly oat milk sits in a home refrigerator Tuesday, May 18, 2021, in Bellingham, Wash. Oatly, the world’s largest oat milk company, will raise $1.4 billion in an initial public offering Thursday, May 20 on the Nasdaq stock exchange. (AP Photo/Elaine Thompson)

A carton of Oatly oat milk sits in a home fridge Tuesday, Might 18, 2021, in Bellingham, Wash. Oatly, the world’s biggest oat milk company, will elevate $1.4 billion in an preliminary general public providing Thursday, Could 20 on the Nasdaq stock trade. (AP Photo/Elaine Thompson)

According to the report, Axler also can take challenge with the company’s determination to ESG practices, arguing that “Oatly doesn’t apply what it preaches in conditions of very good Environmental, Social, and Governance procedures.” Axler referred to a June 2021 trader presentation that he thinks the firm “cherry-picked” the benefits from a analyze “by failing to display that its effect on drinking water consumption is worse than dairy milk.”

“Through a FOIA [Freedom of Information Act] request, we uncovered that Oatly’s production method also generates dangerous volumes of wastewater that requires it to establish its very own procedure services and the Corporation is out of compliance with EPA regulations in New Jersey. Oatly’s 1st research discusses the relevance of transportation expenses, accounting for almost 1/3rd of its environmental influence. But, in Oatly’s quest for rapid company expansion and its race to IPO, we imagine it has recklessly disregarded these prices by finding generation facilities countless numbers of miles from its oat resources, and also sought to obscure the affect of shipping expenditures in its economic statements,” Axler wrote.

Somewhere else, Axler pointed out that channel checks exhibit indicators of industry share loss in Sweden and the U.S. The brief-vendor also pointed to “minimal boundaries to entry, deficiency of competitive advantages, soaring commodity input expenditures, and supply worries produced partly via poorly prepared output services.”

“As this sort of, we think Oatly will sorely disappoint buyers and will never attain profitability,” Axler included.

The Swedish-based oatmilk organization, which designed its community debut in May, observed its stock selling price sink practically 5%. The inventory, which hit an all-time large in early June of $28.73, is down approximately 11% since it went general public.

In a statement on Wednesday afternoon, Oatly claimed it is “knowledgeable that a small seller is creating wrong and deceptive promises pertaining to the company. This shorter seller stands to financially reward from a decrease in Oatly’s inventory rate brought about by these bogus stories. Oatly rejects all these bogus promises by the shorter vendor and stands guiding all things to do and money reporting.” 

Julia La Roche is a correspondent for Yahoo Finance. Abide by her on Twitter.