Attacked in a report by a short seller, Nuvei drank the cup Wednesday on the stock market. After receiving support, however, the management of the Montreal provider of electronic payment solutions reconfirmed its forecasts and long-term goals.
Nuvei founder and CEO Philip Fayer on Wednesday called the Spruce Point Capital report “harmful” (hurtful) at a conference he was attending, and indicated that Nuvei was not going to ignore him.
The CEO also explained that the ultimate answer remained performance, and that he and his team would continue to execute their strategy, reports analyst George Mihalos of the Cowen firm.
At the end of the day, Nuvei said in a statement that the report was “spurious” and contained inaccurate conclusions, innuendos and attacks against leaders.
Personal attacks on executives appear to have been made to draw attention away from the successes and progress made by the company.
Extract from a Nuvei press release
Nuvei stock lost 40% of its value on Wednesday following the publication of the Spruce Point research report.
After slipping as low as $ 54 during the session, Nuvei stock closed at $ 73.12 on Wednesday in Toronto. The stock hit a high of $ 180 in September, but has since started to decline in the markets.
Much of the report focuses on executive background, history of Pivotal Payments (the previous name of Nuvei), acquisition-related entities, organic growth and financial information released by Nuvei, summarizes analyst Paul. Treiber of RBC.
“The past of the directors and the history of Pivotal were known at the time of the initial public offering of Nuvei and the acquisitions made since the IPO are immaterial from a financial point of view”, comments this expert.
“The appreciation of the stock since Nuvei has been on the stock market reflects the significant acceleration in current and anticipated organic growth, and management’s forecasts suggest that this acceleration is sustainable and does not depend on a single client”, adds Paul Treiber.
Regarding the financial information disclosed, this analyst admits that Nuvei is revealing less details surrounding performance measures than its peers, but adds that management has started to reveal more than before.
According to George Mihalos, there is no doubt that an opportunity is created and investors should take advantage of the weakness in the stock to buy stocks. “I continue to believe that my projections and management’s long-term forecasts are achievable. ”
Spruce Point Capital has targeted several Montreal companies over the past four years, including Lightspeed and Dollarama.
In an interview, report author Ben Axler explains that Nuvei appeared on his radar screen when he researched Lightspeed, a cloud commerce company. “I have seen an overlap of interests on the part of some investors,” he says.
These people are doing their research and we are doing ours. We have a different opinion of the merits and the value of the company.
Ben axler
The Caisse de dépôt et placement du Québec and the investment firm Novacap were the two main institutional shareholders of Nuvei when the company went public in September last year. While the management of Nuvei had not responded to our interview request at the time of publication, the Caisse de dépôt indicated that it was a long-term investor and that it made its investment decisions in this perspective. “That’s why we don’t comment on the day-to-day fluctuations of a listed company on the markets, one way or the other. ”
Eleven of the 14 analysts who officially follow Nuvei all recommended buying the stock as of Wednesday.
Short selling is a maneuver where an investor borrows a stock in the hope that its value will fall in the hope of buying it back later at a lower price. By selling Nuvei stock short, Spruce Point Capital is positioned to turn a profit with a fall in the stock.
The American firm Citron Research, which has published its share of negative reports on companies over the years, also came to the defense of Nuvei on Wednesday.
On Twitter, the boss of Citron did not hesitate to say that he was buying shares of Nuvei. “The title is very oversold. Spruce mentions the word “fraud” 48 times in his report. It is easy to find customer complaints about any business. We don’t care that a CEO did not graduate from college or committed traffic violations. ”
In a second tweet, Citron specifies that it does not excuse the omission of information by the management of Nuvei, but believes that the reaction of investors is exaggerated.