For the second time in 16 months, Montreal-based payment processing solution provider Nuvei has come under attack from a New York short seller.
In a research report published Tuesday morning, Spruce Point Capital argues that Nuvei hid the extent of its cryptocurrency exposure, that the firm had a partnership with the forfeited cryptocurrency exchange FTX in which Nuvei apparently held a stake.
Spruce Point says it gets its information from a former executive at Simplex, a company Nuvei bought in 2021. The short seller claims Nuvei failed to transparently disclose all of its interests when announcing a partnership with FTX, which facilitated the movement of funds to FTX.
The report points out that Nuvei should disclose any income or pecuniary benefit received from FTX. “Nuvei also failed to provide investors with a transparent view of its total crypto exposure,” reads the Spruce Point document which argues that the exposure in question increased after the Simplex acquisition.
Spruce Point also believes that the recent acquisition of Paya by Nuvei seems problematic in more than one respect and is particularly concerned about the description of Paya’s customers, its revenue growth and its cash flow.
In December 2021, Spruce Point Capital attacked Nuvei for the first time, saying it was concerned about biographical statements about members of management, company acquisitions, exposure to high-risk and uneconomic sectors. ESG (environment, social and governance) investing, and the likelihood that Nuvei will fail to meet ambitious financial expectations.
After a difficult year 2022 on the stock market for the entire technology stock sector, Nuvei shares have regained some appeal and are off to a good start to 2023.
Spruce Point Capital believes this move is based on false hope that the worst is over, financial goals are more achievable, the recent acquisition of Paya will be successful, and the market valuation is attractive.
Spruce Point also believes that Nuvei is vulnerable to slowing consumer spending in the current economic environment, and that Nuvei relies heavily on rising stock prices to attract, retain, and compensate its employees.
It was not immediately possible to get a reaction from Nuvei management on Tuesday.
Nuvei announced an association with Canadian actor Ryan Reynolds on Monday. Management indicated that the actor has bought shares in Nuvei and that he acts as a marketing advisor, in particular by producing video capsules broadcast on social networks.
