What happened?
The shares of Nuvei (TSX:NVEI)(NASDAQ:NVEI) crashed on Wednesday. At the time of writing, it was trading with about 53% losses for the day at $57.45 per share, touching its lowest level in over a year. As a result of this massive selloff today, NVEI stock — which was up 58% on a year-to-date basis until yesterday — is now down by 26% in 2021.
So what?
Nuvei stock’s seemingly unpredictable massive losses today came after Spruce Point Capital — a New York-based short-seller — severely criticized the company in its latest report this morning. Here are some of the serious allegations that this short report on Nuvei stock highlighted on December 8 while terming the company as “a highly promoted payments processing technology company”:
- Nuvei “has covered up a pattern of business failures.”
- Its business lacks organic growth.
- Spruce Point also claimed that NVEI has “a web of relationships with individuals connected to major Ponzi schemes.”
- According to the short report, Nuvei’s business is declining organically in North America.
- The report also raised questions about the educational credentials and career history of the company’s CEO Phil Fayer.
In its critical report on the Canadian payment services provider Nuvei, Spruce Point said that it sees a “40-60% downside risk” in its stock. This short report is one of the key reasons that hurt investors’ sentiments and drove today’s massive crash in NVEI stock.
Now what?
Nuvei has been one of the most attractive tech stocks on the TSX since it went public slightly more than a year ago. Interestingly, its initial public offering was the largest from the tech sector in the history of the Toronto Stock Exchange.
We must not forget that Spruce Point Capital is the same short-seller that hit out at the Canadian e-commerce company Lightspeed Commerce on September 29, 2021, in a similar fashion. Its short report on Lightspeed also made some serious allegations on its management. This report is the reason why LSPD stock has tanked by nearly 57% since then.
Given the ongoing extreme volatility and panic selling in Nuvei stock, I wouldn’t consider buying the dip in Nuvei stock at the moment. Instead, I’d wait and watch for Nuvei’s response to this short report.
