Nuvei Corp. (NASDAQ: NVEI) came under attack this past week as Spruce Point Capital Management issued a scathing short-seller report, highlighting past “improprieties” of the firm’s management team, business practices, and acquisition choices. Nuvei lost as much as 55 percent of its market cap during Wednesday’s trading session before rebounding into the close, ending the day down 40 percent.
Much of the report attacks the integrity of the firm’s management team along with the founders of its previous acquisition targets. The report suggests that the CEO was untruthful about his educational background, while both the CFO and Chief Corporate Development Officer intentionally obscured their biographies on the company’s webpage to distance themselves from companies involved in fraudulent activity. The report also goes on to attack the acquisitions of Vantage Payments, Base Commerce, Safecharge, and Fifth Manhattan, noting that the founders of SafeCharge and Fifth Manhattan both spent time in prison for fraud, while the founder of Vantage and co-founder of Base Commerce are both suspected of involvement in a Ponzi Scheme. The phrases ‘fraud’, ‘arrest’, and ‘ponzi scheme’ are present within the report a collective 88 times.
The personal attacks outlined in the report seem like they were intended to sow seeds of distrust prior to averring the firm’s financial disclosures as opaque, and calling into question the company’s go-forward growth narrative.
While certain elements of the report are insightful (perhaps), other parts, like those referencing angry customer reviews and poorly kept LinkedIn profiles, seem petty. One senses this is Spruce Point Capital Management throwing everything at the wall and hoping somethings sticks (to their direct benefit, of course).
Nuvei responded after the market close on Wednesday stating, “Nuvei believes the recent report issued by a short seller is intentionally misleading and draws inaccurate conclusions, innuendo and character attacks on key executives, among numerous other issues” before reaffirming its financial outlook and growth targets.
Whatever one’s take on the report, the market has taken heed for now. But, it ought not to be lost on investors that the pandemic and post-pandemic world has been notoriously cruel to short-sellers. And further, it’s hard not to reconcile Spruce’s “reporting” as a naked attempt to drive the stock down to their own economic benefit.