Etsy stock plunges after Citron Research seller stock counterfeit claim

Citron Research said Thursday that Etsy has become one of the world’s largest marketplaces for counterfeit goods, sending the e-commerce firm’s shares down 8.4%.

Etsy did not immediately respond to a Reuters request for comment.

The research firm said the percentage of counterfeit items on the platform has become too high and Etsy can no longer protect it as a small percentage of revenue.

Citron, once known as the most famous short seller, claimed that Etsy allowed sellers on the platform to buy brands’ “words” and then labeled many of them as trusted websites.

The firm, run by short seller Andrew Levt, added that Etsy risks running afoul of the Federal Trade Commission, the Department of Justice, the Securities and Exchange Commission, and Customs and Border Protection.

Some analysts expect Etsy to see a gloomy holiday quarter as low-income consumers cut back on spending on home goods, apparel, jewelry and accessories, which together make up about 60% of the company’s gross merchandise value.

In November, the e-commerce platform posted a third-quarter loss for the first time in eight quarters due to higher shipping costs and a strong dollar.

Etsy shares fell $11.95 to close at $130.31.