• Etsy Inc stock fell as much as 8.4%.
• Etsy had permitted platform users to purchase brand “ad words”.
• Etsy will have a difficult holiday quarter.

Etsy Inc stock fell as much as 8.4% on Thursday after Citron Research said that it had become one of the most popular sites for selling counterfeit goods.

Citron, which solidified its reputation in the research industry by naming underperformers and betting against their stocks, claimed that the percentage of counterfeit goods on Etsy had grown to an unacceptably high level and that the company could no longer defend it as a small percentage of revenue.

An Etsy representative stated in an email that “counterfeit items, fraud, and other illicit practices are explicitly prohibited on Etsy,” and that the firm had increased the number of employees working to combat these issues.

Citron said that Etsy had permitted platform users to purchase brand “ad words” before designating many of them as reliable websites.

Etsy, which was started by Andrew Left, could be in trouble with the Federal Trade Commission, the Department of Justice, the US Securities and Exchange Commission, and Customs and Border Protection, according to Citron.

According to some experts, Etsy will have a difficult holiday quarter as lower-income shoppers cut back on purchases of accessories, clothing, jewelry, and home products, which together account for approximately 60% of the company’s gross retail value.

Due to increasing shipping costs and a strong currency, the e-commerce company reported its first loss in eight quarters in November.

After hours, the stock was just slightly down.

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