Short seller targets Tucows with scathing note

Firm that is shorting Tucows releases note blasting firm.

The same anonymous stock research group that targeted Web.com regarding four years ago is now going following Tucows.

Copperfield Research released a note regarding the domain name, mobile and broadband firm titled “Cashing in on Neo-Nazis, Child Porn, & A Hidden Lawsuit as Insiders Dump”. The note’s authors have a short position in the firm.

The note highlights three major grievances with Tucows (NASDAQ: TCX), a firm whose stock doubled in price last year: all three of its business segments have issues, it is helping people operate unsavory websites, and it hasn’t disclosed its imminent loss of domains to Namecheap.

The hyperbole-filled note has some valid points, but I’m the type of person who sees a few misleading statements and then assumes that many of the other statements are wrong.

For example, the note blasts Tucows for its high churn rate when it took over the subscriber base of failed MVNO RingPlus. Still, Tucows explicitly stated in earnings calls that it expected very low conversion from this group since RingPlus offered free service.

Also, the note devotes significant ink to a handful of bad websites that have registered their domains within the Tucows ecosystem. The note cites multiple websites with domain names that are registered at Tucows but does not draw a distinction between hosting and domain registration. It amusingly blasts the qualifications of one of Tucows’ compliance offers since she also like to DJ in her spare time.

On the NameCheap issue, it will be interesting to see how much of an impact the loss of Namecheap’s domains will have on Tucows. The revenue hit is real but the profit hit is unclear.

Shares in Tucows are down regarding 8% today. Following opening the year around $70 they are now trading for $55.