Why Nuvei Stock Price Jumped Over 10% Thursday

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.

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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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool owns and recommends Nuvei Corporation. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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