Shares of 2Crsi SA tumbled 43.1% to trade at c25.40 after Grizzly Research, a U.S.-based short-seller, released a report alleging that the Strasbourg-based server manufacturer overstated its commercial progress in artificial intelligence through dealings with undisclosed related parties in the United States.
Grizzly's report calls into question a headline item in 2CRSi's order book: a $610 million contract announced with an unnamed client. The short-seller asserts that this contract, together with other sizable orders disclosed by the company, represents a substantial mischaracterization of 2CRSi's genuine business activity.
At the centre of Grizzly's allegations is an individual identified as Joseph Church. The report describes him as a veterinarian without data-centre experience and contends that he is linked to a group of shell companies. According to Grizzly, all of these entities are registered at the same small veterinary clinic in Plattsburgh, New York - the address the short-seller says was used by undisclosed counterparties that enabled 2CRSi's stated expansion in the U.S.
The short-seller also highlights what it calls an anomalous revenue trend following 2CRSi's disposal of its Boston Limited subsidiary in 2023. Boston Limited, the report notes, produced more than 83% of group revenues prior to its sale. Yet after the divestment, U.S. sales reportedly rose sharply despite the country having contributed only a negligible share of the company's revenues historically. As of the time of writing, 2CRSi had not issued a public rebuttal or clarification of the claims.
The timing of the report intensified pressure on the company against a wider market backdrop that was already unfavourable to growth and technology stocks. French technology and semiconductor names had retreated markedly on Tuesday amid concerns tied to the Federal Open Market Committee meeting - which began that day under new Federal Reserve Chair Kevin Warsh - with a policy decision expected on Wednesday evening.
Persistently elevated U.S. inflation has reinforced expectations for a more restrictive U.S. monetary stance, a dynamic that has weighed on high-multiple growth shares across European exchanges. European markets opened without a clear directional bias today, leaving little in the way of market support for a stock facing acute credibility questions.
Investors confronted a convergence of forces: explosive accusations of fraudulent sales practices, an ensuing credibility vacuum over 2CRSi's reported U.S. revenue base, and an existing macroeconomic headwind tied to monetary policy uncertainty. The result was a dramatic single-session decline that erased nearly half of the stock's market value after it had previously climbed to a 52-week high of c59.95 on the strength of its AI-server growth narrative.
Key points
- 2Crsi shares plunged 43.1% to c25.40 following allegations by Grizzly Research that the company misrepresented U.S. business through undisclosed related parties.
- The short-seller questions a $610 million contract and cites a cluster of shell companies allegedly linked to a veterinarian named Joseph Church, all registered at a single veterinary clinic in Plattsburgh, New York.
- The report flags a sharp rise in U.S. sales after 2CRSi sold Boston Limited in 2023, despite Boston Limited having produced more than 83% of prior group revenues; the company had not publicly responded at the time of writing.
Risks and uncertainties
- Credibility risk for 2CRSi's reported U.S. revenue base - the allegations, if unresolved, could undermine investor confidence in the company's order book and revenue recognition.
- Market risk from macroeconomic conditions - elevated U.S. inflation and the FOMC meeting under a new Fed chair have already pressured French tech and semiconductor stocks, reducing the likelihood of a supportive market backdrop.
- Execution and disclosure uncertainty - with no public response from 2CRSi as of the time of writing, questions remain about the company's ability to address or refute the specific claims made in the Grizzly report.