What happened?
Nuvei (TSX: NVEI)(NASDAQ: NVEI) stock continues to recover sharply after crashing by 40% yesterday. At the time of writing, NVEI stock was trading at $82.15 per share with more than 12.4% gains for the day. However, despite today’s sharp recovery, its share prices were down more than 30% from Tuesday’s closing level due to yesterday’s panic selloff.
So what?
New York-based short-seller, Spruce Point Capital Management, released its critical report on Nuvei yesterday, suggesting a downside risk between 40% to 60%. In my opinion, even Spruce Point might not have expected that NVEI stock would crash as much as 55% within a few hours of the release of its report. But that’s exactly what happened, as the stock plunged to its lowest level in more than a year during yesterday’s intraday trading — before erasing some of these losses by the end of the day.
After the market closing bell on Wednesday, Nuvei tried to refute these allegations in a press release saying that the short report “is intentionally misleading and draws inaccurate conclusions.” The company added that “the personal attacks on Nuvei executives made by the short-seller appear to have been made to distract from the company’s achievements and progress.” It urged “investors to not make decisions based on the short-seller report” and look at its recent filings instead.
With this, Nuvei reaffirmed its short-term as well as medium-term financial growth outlook, which seemingly is helping it regain investors’ confidence and driving its stock higher on Thursday.
Now what?
As I said in yesterday’s article, Nuvei stock is very likely to remain highly volatile, at least for a few sessions after the short report release. This was one of the reasons I suggested to avoid buying it at the moment, as its extreme volatility could increase the risk profile of your portfolio. Especially if you are an investor with a limited risk appetite, you may want to wait for the volatility to settle down a bit.
That said, I still don’t think that Spruce Point’s critical report on Nuvei, in any way, manages to prove it as a bad investment or affects its long-term growth outlook.
