Fizzy Drink Maker Accused Of Fuzzy Accounting

(RTTNews) - Shares of National Beverage Corp. (FIZZ) fell about 15 percent on Wednesday after short selling firm Glaucus Research Group has said it is shorting the soft-drink maker and accused the company of manipulating earnings.

In a research report, Glaucus alleged that National Beverage achieved its "remarkable history of financial performance in part by manipulating earnings."

According to Glaucus, while sales of the maker of LaCroix flavored seltzers have grown 36 percent over the past decade, the company's advertising and shipping costs have remained flat.

The short selling firm asked whether National Beverage has so revolutionized the beverage business that variable costs such as shipping and marketing are uncorrelated with rising sales. It also questioned how the company could report greater operating leverage than bigger peers like PepsiCo Inc. (PEP) or Coca-Cola Co. (KO).

Glaucus urged government and regulatory agencies to launch a full investigation of the company, its accounting and its practices.

National Beverage's shares have surged about 58 percent over the past 12 months until the market's open on Wednesday.

In response, National Beverage called the Glaucus report "false and defamatory" and said it believed the report was intended to severely manipulate its stock price downward in support of short sellers.

"The allegations in this "report" are untrue and are based on allegations made in a complaint for the purpose of extorting money from the company. That action was dismissed as being without foundation and the complaint was found to be based on lies," National Beverage said.

The company also said its financial statements are routinely audited and added that it stands behind the integrity of its financial statements as well as SEC filings.

Further, National Beverage noted that the increased volume of its sales and operating performance will translate into excellent earnings and cash flow to the benefit of its shareholders.