Why Nuvei Stock Tanked 33% in December

Spruce Point’s critical report triggered panic selling in Nuvei (TSX:NVEI)(NASDAQ:NVEI) stock last month.

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What happened?

The shares of Nuvei (TSX:NVEI)(NASDAQ:NVEI) crashed by about 33% in December 2021 against a 3% rise in the TSX Composite benchmark. With this, NVEI stock saw more than 40% value erosion in the fourth quarter. By comparison, other tech stocks like Lightspeed, LifeWorks, and Docebo plunged by 56%, 21%, and 5%, respectively, during the quarter.

So what?

December was the second consecutive month when Nuvei stock posted big double-digit losses. It also turned out to be the worst month for the company’s shareholders in its history as a publicly listed company.

In December, its massive losses were primarily driven by a Spruce Point’s — a New York-based short-seller — latest report. In its report, the short-seller made tonnes of vague allegations on the company and also attacked its management — apparently with some personal attacks on Nuvei’s CEO.

For example, Spruce Point alleged that Nuvei “has covered up a pattern of business failures” and has “a web of relationships with individuals connected to major Ponzi schemes.” However, the short-seller failed to provide any credible evidence for these allegations.

Moreover, the report also highlighted some irrelevant details about its CEO Phil Fayer’s educational credentials and lifestyle. While most Street analysts seemingly rejected this short report, most retail investors started selling NVEI stock in a panic to minimize risks to their portfolio. This panic selling was responsible for a more than 40% drop in Nuvei’s share prices on December 8, leading to its big losses for the month. A recent tech sector-wide correction also pressurized its stock last month.

Now what?

It is also important to note that Spruce Point is the same short-seller that made similar allegations about Lightspeed in September. The short-seller clearly benefitted from the recent crash in Nuvei and Lightspeed stocks.

While NVEI stock has seen a good recovery in the last couple of weeks, it still continues to trade with high volatility. Despite Nuvei’s efforts to regain investors’ confidence by rejecting the short-seller’s claims on multiple occasions and reaffirming its financial outlook, the stock is struggling to completely recover from the short report-driven losses.

Nonetheless, I expect NVEI stock to showcase a sharp recovery in 2022, as it continues to post stronger financial growth in the coming quarters. Given its strong financial growth track record and its huge growth potential, I find the stock really cheap to buy right now and hold for the long term.

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. The Motley Fool recommends Docebo Inc. and Lightspeed Commerce. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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