Nuvei’s (TSX: NVEI) stock price has surged 49% since March 15, when the firm confirmed it was in advanced talks to get acquired by global private equity firm Advent International. The company has strong fundamentals and a scalable payments platform. However, the fintech faced the wrath of the stock market since its initial public offering (IPO) in October 2020.
It takes a lot to go public. Analysts, investors, short-sellers, and arbitrators are not easy to please. And the last four years have been more volatile. Thus, it is no surprise the company took the first option to bid adieu to the stock market.
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Nuvei stock’s short stint in the stock market
Nuvei entered the stock market to raise equity capital to fund its acquisitions. While e-commerce has been the biggest revenue generator for Nuvei, its Paya acquisition allowed it to scale to large enterprises. Although this acquisition took time to deliver results, it did give Nuvei big wins.
However, short-seller Spruce Point Capital made Nuvei’s stock market journey difficult with false accusations. Even though analysts backed Nuvei, investors reacted to the short seller and have sent the stock down 57% since April 2022. Value investors hopped on to buy Nuvei stock at the dip as they looked at the business and not the noise created by the short-seller.
Had Nuvei chosen to stay put, the stock would have had significant growth potential in a strong economy with healthy consumer spending. The stock showed a glimpse of its growth in the 2023 Santa Claus rally when it surged 60% in November and December.
Nevertheless, Nuvei’s management is done with fire-fighting the market and is focusing on growth. Advent is taking Nuvei private in an all-cash deal of US$6.3 billion.
What does the Advent deal tell us about Nuvei?
Advent gave Nuvei a buyout offer at a 48% premium from where it was trading. Such a large premium shows that Advent sees value in Nuvei that the market failed to realize. Even at a US$34 stock price offer, Advent is buying Nuvei 30% above the latter’s IPO price of US$26. An all-cash deal also shows the buyer’s confidence in Nuvei.
Is there more upside for Nuvei stock?
The market has priced the acquisition deal into the Nuvei stock price. Major shareholders seem pleased with the offer, leaving little room for opposition. The deal will take a few months as Nuvei will have to get shareholders and regulatory approval. So far, the environment is conducive for the deal to go through. Unless any major event jeopardizes the deal, there is not much scope for a stock price upside.
If you hold Nuvei shares, it is a good time to sell the stock even at a loss. Such events make you realize how unpredictable the market can be. Even a fundamentally strong stock can leave you in the red.
Is Lightspeed stock a buy?
The stock market treated Nuvei similarly to how it treated Lightspeed Commerce (TSX: LSPD) after Spruce Point Capital shook investors’ confidence in the company. In an interview, CEO Dax Dasilva was asked if Lightspeed could be next, and he kept that option open. Like Nuvei, Lightspeed entered the stock market to raise funds for acquisitions. However, it has paused its acquisition spree and is focusing on realizing value from its past acquisitions.
Revenue growth no longer excites value investors. They want to see if the company has the potential to grow profitably. As I said, investors are tough to please. Thus, Dasilva returned as the CEO and is focused on making the company profitable.
If Lightspeed Commerce goes private with a premium buyout offer, its stock price could jump to match the offer price. The stock is currently trading at $18.06, 12.5% above its 2019 IPO price of $16. Buying the dip of a fundamentally strong stock is beneficial in most circumstances. A buyout offer or the second-half recovery in consumer spending could drive the stock upwards.
Investor takeaway
You could consider selling Nuvei stock and use the proceeds to buy Lightspeed Commerce at its 52-week low.
