Is XP Inc On The Brink Of Implosion? Inside The Bear Cave's Troubling Allegations

Author: Michael Cohen | August 03, 2023 01:09pm

XP Inc (NASDAQ:XP), a prominent Brazilian investment services company, is facing serious allegations of internal turmoil, unethical practices, and potential implosion. These assertions are detailed in a short report by Edwin Dorsey, author of "The Bear Cave."

The company, committed to transforming the financial markets in Brazil, is now under scrutiny, with various signs pointing to a broken system, according to Dorsey's analysis.

Founded in 2001, XP has expanded to over 4 million clients, offering a wide array of financial products through more than 13,000 autonomous brokers. However, according to Dorsey, the company's model is on the verge of collapse, with issues ranging from infuriated brokers to a toxic management culture. "The Bear Cave" outlines these findings and raises serious concerns about XP's future.

XP didn't immediately respond to Benzinga's request for comment.

Internal Struggles And Unethical Practices

Recent reviews on Glassdoor, as highlighted by "The Bear Cave," paint a grim picture of XP's internal environment. Employees have described XP as an "extremely unethical company" that forces them to sell products without considering the customer's profile. Other reviews lament the toxic environment and corrupt management culture within the company, according to Dorsey.

Also Read: 'We Are Still In The Wait And See Stage': 5 PayPal Analysts Weigh In As Stock Tanks Despite Q2 Earnings Beat

Founder's Concerns

An internal email from XP's founder and chairman, Guilherme Benchimol, reveals his dissatisfaction with the company's direction. "The Bear Cave" cites Benchimol's concerns over the transformation of great leaders into bureaucrats and the decline in client trust. "Have they lost the will to keep winning and moving forward? Are we giving it all we can? Currently, the average account opening with investment over 300,000 reais is, unbelievably, 0.3 per advisor per month. To believe that an advisor opens only four accounts a year is unacceptable...," Benchimol said in the email, as reported by "The Bear Cave."

Regulatory Attention And Past Complaints

Dorsey also points to XP's potential regulatory issues. BSM Supervisão, a self-regulating entity connected to Brazil's primary stock exchange, has jurisdiction over XP. From 2009 to 2018, approximately 141 complaints were filed against XP, a number significantly higher than other financial institutions like Banco Bradesco (NYSE:BBD), Banco Santander (NYSE:SAN), and Itaú Unibanco (NYSE:ITUB), "The Bear Cave" states.

Investigative Research And Accounting Irregularities

"The Bear Cave" further highlights a 2020 investigative research report by The Winkler Group that raised questions regarding XP's asset values, revenue recognition, and deductions. The report also documented a pattern of regulatory noncompliance and questionable executive judgment. XP dismissed the allegations, stating, "We reject The Winkler Group report's allegations. We achieved our goals through hard work and dedication, and did not take any shortcuts," as cited by "The Bear Cave."

With these allegations brought to light by Dorsey and "The Bear Cave," investors and clients alike will be closely watching how XP addresses these concerns.

Now Read: Nikola Has 2 Key Events This Week: Here's A Roadmap For EV Investors To Navigate The Days Ahead

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock

Posted In: BBD ITUB SAN XP