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Why Pareteum Stock Plunged Today

Steve Symington, The Motley Fool

What happened

Shares of Pareteum (NASDAQ: TEUM) plunged 20.3% on Wednesday, after the cloud-communications platform specialist found itself in the crosshairs of yet another short-selling firm.

In a scathing piece this morning that effectively amplified concerns brought by short-seller Aurelius Value earlier this month, Viceroy Research suggested Pareteum "appears to be in breach of U.S. sanctions against Iran," with its services to Iran-based mobile virtual network operator Amin SMC. Viceroy elaborated that Amin SMC's chairman, Hamid Reza Amirinia, is "suspected of breaching sanctions with an Iranian government mandate to launder money for the regime."

Frustrated businessman with glasses in front of a computer monitor.

IMAGE SOURCE: GETTY IMAGES.

So what

Viceroy Research acknowledged the previous short-seller's report -- which Pareteum CEO Hal Turner promptly rebuked two weeks ago -- but said "given the discourse" it was "prudent that we also share our findings."

The firm went on to liken Pareteum to "the Wild West of telecoms," criticized its history of "promotional press releases" highlighting insignificant customer wins, and accused the company of inflating its its backlog metrics to "hype up the share price and reassure investors."

Viceroy says its valuation indicates potential downside of 44% to 76% from Tuesday's close, "with a more severe scenario more probable."

Now what

We should probably take this note with a grain of salt, particularly given its sensationalist tone, and -- with Pareteum's plunge and subsequent rebound on the similar short-seller's attack earlier this month -- its seemingly opportunist timing.

It remains to be seen, of course, whether Pareteum management will step out again to rebuke Viceroy Research's allegations. But it's no surprise to see the stock pulling back hard today.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.