Shares of Kyndryl (KD.N) fell nearly 13% on Thursday following allegations from short-seller Gotham City Research that the IT services company manipulated its financial metrics.
Allegations from Gotham City
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Inflated Financial Metrics: Gotham City claims Kyndryl misrepresented adjusted EBITDA and adjusted free cash flow to appear profitable while actually losing money and burning cash.
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Declining Revenue: The report argues Kyndryl has never generated free cash flow and has seen yearly revenue declines since its separation from IBM.
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Hidden IBM Costs: Kyndryl allegedly understates its true costs to IBM, with the firm predicting a $1-2 billion increase in service costs over the coming years.
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Accounting & Disclosure Irregularities: Gotham City also flagged questionable financial reporting related to IBM payments from 2019 to 2023.
Kyndryl’s Response
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The company strongly denied the allegations, calling the report inaccurate and designed to manipulate the stock.
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A Kyndryl spokesperson stated that the firm was never contacted by Gotham City and would have refuted the claims if given the opportunity.
