Here’s Why Shares of the Maker of LaCroix Seltzers Are Tanking

September 28, 2016, 9:25 PM UTC
LaCroix/National Beverage

Short selling firm Glaucus Research thinks there’s something fishy about National Beverage.

Shares of the maker of LaCroix flavored seltzers fell as much as 15% in trading Wednesday, after the Gaucus Research Group revealed that it was shorting the company in a research report, in part because it thinks the drink maker is cooking its books.

The short selling firm tore into the maker of LaCroix, Faygo, and Rip It energy drinks, alleging that National Beverage “has achieved its remarkable history of financial performance in part by manipulating earnings.”

According to Glaucus, while National Beverage’s sales have grown 36% over the past decade, its advertising and shipping costs have remained flat.

“Has National Beverage so revolutionized the beverage business so that variable costs such as shipping and marketing are uncorrelated with rising sales?” the short sellers wrote. “How could National Beverage report greater operating leverage than larger peers like Coca-Cola or Pepsi, who should benefit from economies of scale and greater brand capital?”

National Beverage, in a statement posted on its website on Wednesday, said Glaucus’ claims were false. The company said its financial statements had been audited, and that they are accurate. “The allegations in this ‘report’ are untrue and are based on allegations made in a complaint for the purpose of extorting money from the company,” said the company in the statement. “That action was dismissed as being without foundation and the complaint was found to be based on lies.”

Glaucus’ report comes as shares of National Beverage (FIZZ) have risen nearly 58% over the past 12 months until the market’s open on Wednesday. The LaCroix maker recently posted a stellar first quarter in which margins expanded by 5.5 percentage points to 39.4% in comparison to the same quarter a year earlier. Meanwhile, sales rose 17% in comparison to the same quarter a year earlier as the company focused on LaCroix as consumer preference began to pivot away from sodas. Business Insider wrote last year that sales were exploding for the once sleepy seltzer brand.

But the firm’s earnings was not the only point that bothered Glaucus. The firm cited legal documents that point the finger at CEO and founder, Nick Caporella. Glaucus claims that these papers “show a culture of unethical behavior and a complete lack of respect for the integrity of the courts.”

A former lawyer for National Beverage, Scott Rothstein, for example, was deposed in Miami four years ago during a bankruptcy case. During the deposition, Rothstein said that he and National Beverage’s former general counsel David Boden were “fudging the facts (in a National Beverage litigation) to aid Mr. Caporella.”

In a separate 2012 complaint filed by a former consultant to National Beverage, David Mursten, regarding his employment with the company, Mursten alleged the Caporella said he had a “‘little jewel box’ and when actual earnings were short of where he wanted earnings to be, Caporella would go to his ‘little jewel box’.”

“The situation reminds us of Valeant,” the short seller wrote. “How do you value a company when you believe that the management team manipulates reported financials but that nonetheless possesses some decent assets?”

The short selling firm assigned a valuation of $16.15 to shares of National Beverage—a 62% downside from the company’s Wednesday closing price.

Fortune has reached out to National Beverage, and will update this story when we hear back.

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