Gildan Activewear shares tumbled 18% on June 16, wiping out $2.15 billion in market value, after a short seller accused the company of channel stuffing, prompting a shareholder rights investigation.
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Gildan Activewear drops 18% as short-seller report triggers probe
Gildan Activewear shares tumbled 18% on June 16, wiping out $2.15 billion in market value, after a short seller accused the company of channel stuffing, prompting a shareholder rights investigation.
"Our investigation is focused on whether Jehoshaphat's analysis is accurate and whether Gildan has engaged in improper revenue recognition practices," Reed Kathrein, the Hagens Berman partner leading the probe, said.
Jehoshaphat Research, in a report titled "STUFFING ALL OF THE CHANNEL SOME OF THE TIME?," alleged that Gildan compelled customers to pull forward sales at quarter-ends by offering extreme payment terms and rebates. A former employee described a practice where the sales team would offer incentives to distributors to take on more weeks of supply when the company risked missing its targets, according to the report. The firm also claimed Gildan provided product to distributors without requiring payment until after the customer had resold it.
The allegations put Gildan's revenue recognition practices under scrutiny just months after it completed its acquisition of HanesBrands in December 2025. Former HanesBrands investors who received GIL shares as consideration now face potential losses, with Hagens Berman encouraging them to contact the firm.
Gildan had consistently assured investors that its financial statements complied with applicable accounting rules governing proper revenue recognition, according to the company's public statements. The Jehoshaphat report, based on interviews with former employees, customers and distributors, challenged those assurances.
The 18% single-day decline on June 16 marked one of the steepest drops in the company's recent history. Gildan shares have faced continued pressure since the report's publication, though the company has not publicly addressed the specific allegations.
Hagens Berman, a global plaintiffs' rights firm that has secured more than $2.9 billion in securities litigation, said it is also seeking whistleblowers with non-public information about Gildan's sales practices. The SEC whistleblower program offers rewards of up to 30% of any successful recovery.
The investigation puts Gildan's financial reporting credibility at a critical juncture. Investors will watch for any restatement of prior results or regulatory action, with the company's next quarterly filing serving as a key test of whether the allegations have merit.
This article is for informational purposes only and does not constitute investment advice.
