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.

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WHAT HAPPENED

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The activist investment fund manager (Spruce) issued a strong sell rating on the stock and outlined several reasons for the move.

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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.”

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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.”

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COMPANY OPINION

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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.

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Nuvei believes that the report is intentionally misleading, draws inaccurate conclusions, and infers character attacks on executives, among numerous other issues.

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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.

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NOW WHAT

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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.  

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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.  

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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.”

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ABOUT NUVEI

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Nuvei provides electronic payment technology solutions to merchants and partners in North America, Europe, Asia Pacific, and Latin America.

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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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