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Investing.com — Shares of Montreal-based electronic payments company Nuvei Corp (NASDAQ:NVEI) plunged 37% after Spruce Point Capital Management — an activist investment fund manager — issued a strong sell rating on the stock.
The short-seller outlined several reasons for the move, including fraud allegations from customers. It issued a report titled “fool me once, twice, but not three times,” stating it sees a 40% to 60% long-term downside risk.
A Nuvei representative wasn’t immediately available for comment.
The hedge fund said in a report: “After conducting a forensic financial and accounting review, Spruce Point believes shares of Nuvei Corp. (TSX and Nasdaq: NVEI), a highly promoted payments processing technology company, has covered up a pattern of business failures, lack of organic growth, and a web of relationships with individuals connected to major Ponzi Schemes and alleged fraudulent activities.”
They added: “Buyer beware: Nuvei’s financial disclosures are weak and we believe results are being temporarily enhanced from concentrated exposure to high risk gaming and eCommerce.”
Other claims included declining North American organic growth.
Since the release, Nuvei’s shares fell to a low of $43.10.
However, Citron Research, which is no longer a short seller, said Nuvei shares were oversold, and it is buying the stock. In addition, Citron said there was “no proof of fraud.”
