The US-listed shares of Canadian fintech company Nuvei slipped 2 percent on Tuesday after New York-based investment management firm Spruce Point Capital Management published a negative report on the Montreal-based company, a Bloomberg report said.
Spruce Point revealed that it held a short position on the company and urged investors to sell their shares in the company.
Short position or short-selling refers to a stock market investment in which investor will profit if the value of a company’s share falls.
After the report became public, Nuvei shares tumbled about 6 percent early on Tuesday but pared losses towards the end of the day.
In the report, the New York-based firm accused Nuvei of acquiring a US company that had exaggerated its growth. Paya Holdings, a US-based payments solutions company, was bought for $1.3 billion in January 2023. Spruce Point alleged in its report that the acquisition “appears troubled” as Paya was losing market share before the takeover.
Spruce Point, a well-known short seller in the US stock markets, also alleged that Nuvei may have an equity interest in bankrupt crypto exchange FTX and failed to disclose its total crypto and digital exposure.
“Our analysis suggests that Nuvei’s underlying economics are deteriorating and that it is heavily reliant on buoying its stock price as a tool to attract, retain and compensate employees. We believe the current sell-side analysts fail to incorporate our concerns with the Paya acquisition and assume Nuvei will be successful despite its documented recent history of failing to extract value from acquisitions,” the short-seller said in its report.
The short-seller said that it expects Nuvei’s stocks to decline in total value this year. adding that it faces a 35-50 percent long-term downside risk. Interestingly, shares of Nuvei are up almost 60 percent this year.
Second report in less than 2 years
Spruce Point’s report came just days after Hollywood actor Ryan Reynolds announced that he has invested an undisclosed amount in the fintech company.
“Nuvei is impressive. The leadership team is exceedingly intelligent and hard-working and it’s about time a Canadian company got the type of attention American tech companies do,” a press release quoted Reynolds as saying.
This is the second time in less than two years that Spruce Point has released a report on the Montreal-based company, which offers payment services for several industries.
In December 2021, the US investment management firm had noted that the fintech company faced “40 to 60 percent long-term downside risk.”
The 2021 report also highlighted a number of alleged shortcomings in Nuvei’s business, including wrong top management hirings and poor financial performance.
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