Nuvei’s stock declined 37% during intraday trading on 8 December 2021, following a research report published by Spruce Point Capital Management, alleging inaccuracies in the company’s growth claims.
WHAT HAPPENED
The activist investment fund manager (Spruce) issued a strong sell rating on the stock and outlined several reasons for the move.
The short-seller reported claims that Nuvei made questionable hiring decisions, has a “highly suspect” acquisition strategy, and that the company has a long period in its history when it “experienced limited to no organic growth.”
Furthermore, while Nuvei is reporting “remarkable financial success,” Spruce Point argues that the Company’s financial disclosures are “weak” and that “results are being enhanced temporarily from concentrated exposure to high-risk gaming and eCommerce.”
COMPANY OPINION
In turn, the Canada-based payments company (NASDAQ & TSX:NVEI) reaffirmed its financial Outlook for Full Year 2021 and reiterated its long-term growth targets for total volume, revenue, and adjusted EBITDA margin disclosed on 8 December 2021.
Nuvei believes that the report is intentionally misleading, draws inaccurate conclusions, and infers character attacks on executives, among numerous other issues.
It further urges investors not to make decisions based on the short-seller report and to review public filings for material information that pertains to the business.
NOW WHAT
According to The Motley Fool,” It is not uncommon for short-sellers to release damaging reports about companies and that it will be up to investors to decipher whether or not the allegations are reason enough to sell their shares.
In this scenario, the short-seller could potentially profit significantly from Nuvei’s stock price decline at the expense of Nuvei’s shareholders, customers, and employees. Since the release, Nuvei shares dropped to a low of $43.10.
However, Citron Research, which is no longer a short-seller, said Nuvei shares were oversold, and it is buying the stock. Citron also said there was “no proof of fraud.”
ABOUT NUVEI
Nuvei provides electronic payment technology solutions to merchants and partners in North America, Europe, Asia Pacific, and Latin America.
Company solutions include end-to-end processing, a global gateway for acquirer and processor, checkout solution, smart-routing technology, and more.
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