Spruce Point Capital Management is putting that back. The activist investor specializing in short selling is targeting Nuvei this time. Reaction: the shares of the Montreal company specializing in payment solutions fell by some 40%.
In an accusatory report, Spruce Point raised concerns about Nuvei and its senior management. The investment firm also denounced a lack of disclosure regarding the predecessor entities of Nuvei, in addition to criticizing the internal growth trend and the acquisition strategy of the payment processing company. This exit exposed the shares of Nuvei to a downside risk of 40% to 60%. In response, the stock fell 40.4% on Wednesday, to $ 73.12, after peaking near $ 176 in late September.
The New York firm, however, had to clarify that it held a short position on Nuvei and owned derivative securities likely to benefit from the fall in its share price. Selling short involves selling borrowed stocks, which will be redeemed with stocks purchased at a desired lower price.
The response from the target company has come. This report “is intentionally misleading, draws inaccurate conclusions and launches innuendos and attacks. to the man against key senior executives, among other questionable points. Personal attacks […] appear to have been made for the purpose of distracting attention from the achievements and progress of the Society. The short seller admits that he could profit significantly from the decline in Nuvei’s stock price, at the expense of Nuvei shareholders, customers and employees. “
So many accusations and allegations on the part of Spruce Point which remain to be validated.
Spruce Point has also just taken on Lightspeed. On September 29, the firm criticized the e-commerce specialist for lacking transparency, for not disclosing enough information to determine its true organic growth and for exaggerating the size, quality and growth prospects of its companies. activities. Lightspeed responded by claiming that the report contained “a great number of material misstatements and misinterpretations, misleading and clearly intended to benefit” the author.
Lightspeed stock fell 28% on the heels of this report, to start at $ 147.76 and hit a first low at just over $ 108 on October 8. It has never recovered since, closing at $ 61.41 on Wednesday after an ill-received financial forecast update.
History holds that the specialist in short selling had bet in the right direction with TSO3, a Quebec company specializing in the sterilization of medical equipment. In August 2017, when the bullish potential of the second was almost unanimous among analysts, the first recommended to sell the stock, putting the risk of loss at 80%. She began to collapse five months later. TSO3 was sold to an American company after losing 87% of its value.
In 2018, Spruce Point was targeting Maxar. He accused the “flagship” of the aerospace sector, well established in Montreal, of hiding in an accounting way certain mistakes made in the past. The stock fell immediately, eventually losing over 90% of its value in 13 months.
Spruce Point will have “played luck” with Dollarama at best. In a report released in fall 2018, the firm argued that the stock deserved a 40% decline due to significant fundamental headwinds, unrealistic growth targets and questionable governance practices. The stock fell 38% to hit $ 31 in December. But it has shown a gain of over 80% since then.
And the short seller will have bitten the dust with Canadian Tire. In December 2019, he called the retail giant’s accounting practices “aggressive,” “misleading,” estimating the stock’s potential for a 50% collapse. The fall will have been 14%, followed by a rise of 90%.