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  "documentTitle": "dLocal (DLO)",
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  "authorName": "Carson Block",
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  "notes": "This is the cover/introductory page of a short-seller research report by Muddy Waters.",
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      "text": "While we have found no pictures of its CEO wearing black turtlenecks, our research leads us to believe that DLO is likely a fraud.",
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      "text": "Market Cap: $6.3 Billion",
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      "text": "Muddy Waters is short DLocal Ltd. (NASDAQ: DLO). DLO, a fast-growing payments company based in Uruguay, spun out of a high-risk processing business, has reported stellar growth and profitability that makes it an outlier. While we have found no pictures of its CEO wearing black turtlenecks, our research leads us to believe that DLO is likely a fraud. We also have concerns over its disclosures about, and controls of, client funds.",
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      "text": "As we dug in, we found a series of lies that the company has told, along with accounts it has altered to corroborate the lies. This series of lies had to do with disguising the timing of an option exercise and the source of funding for that insider option exercise. Absent the most glaring level of incompetence, these account alterations should point to fraud. This line of research also gives rise to concerns about the flow of funds around DLO’s PrimeiroPay asset acquisition in 2021.",
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      "text": "We have concerns about the controls for client funds. When preparing a cash flow reconciliation that is net of movements of merchant funds-related accounts, DLO’s 2020 cash flows do not reconcile. We calculate a $3.3 million deficit in DLO’s ability to fund its dividend. This problem is mirrored at the Malta Operating subsidiary level, at which we calculate a $4.1 million deficit in the subsidiary’s ability to fund its cash uses. While the discrepancies could be due to inadequate or inaccurate disclosures, it also gives rise to the concern that DLO possibly dipped into client funds for extra cash to pay insiders.",
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      "text": "Early in our research, we were reminded of the old adage “To hide a lie, a thousand lies are needed.” DLO has repeated disclosures about its TPV and accounts receivable that flatly contradict one another. There is also a contradictory discrepancy between two key subsidiaries’ accounts payable and accounts receivable. These types of seemingly innocuous misstatements are, instead, often signs of cooked books because it can become quite a strain to keep the numbers straight once you start manipulating them.",
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      "text": "We are skeptical of DLO’s reported TPVs, but we are highly skeptical of its Take Rates. Approximately half of DLO’s revenue and Take Rates are comprised of foreign exchange gains and fees. We estimate that DLO’s FX gains are roughly double – if not close to triple – what they should be.",
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      "kind": "quote",
      "text": "“History Never Repeats Itself, but it Does Often Rhyme” — Mark Twain",
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      "text": "1 Quote popularly attributed to Mark Twain.",
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      "text": "Date: November 16, 2022; Company: DLocal Ltd.; Ticker: DLO US; Industry: Payment Processing; Stock Price: $21.22; Market Cap: $6.3 Billion; Average Daily Volume (90-Day): $25.5 Million",
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