C3.ai (NYSE: AI) stock is down 26% on Tuesday and another 3.7% Wednesday morning as the implications of the short seller's report sink in. The actual report itself, by Kerrisdale, was month ago. That report did knock off a chunk of the AI stock price but it has since recovered. Recovered and more in fact. The excitement about AI in general, large language models and ChatGPT has over-ridden what a short might have to say about it.
We can thus have two entirely different views about what's now happening. For the shorts have written to the C3.ai corporate auditor insisting that a number of issues must be taken into account in the upcoming audit. We can have entirely different views about those allegations. They are the sort of thing you would say about a software company if you wanted to depress the stock price. Classifying one type of revenue as another is the sort of thing that is an art, not a science, just as one example. Opinions on what goes where can legitimately differ. On the other hand the reason such allegations can have such an effect on the stock price is exactly because they are the sort of thing which, when done to any form of excess, have taken down software companies before.
C3.ai stock price from NASDAQ This is when we have to put our cynical hat on. Start from one view. Which is that the short seller is, as they've said they are, short. The C3.ai stock price is rising against their position and they are losing money. So, issue another letter to get that price back down again and rescue the bet. We have to admit that this is at least feasible.Or, alternatively, we can buy the basic identification of the short opportunity and see this letter to the auditors simply as the next stage in the process. What matters here of course is that if the allegations are true then C£.ai stock isn't going to recover. But if they're untrue then given that excitement over ChatGPT they may well go higher again. It's really a matter of who we believe.
