Short seller Spruce Point hits Fintech Nuvei hard

Short seller, Spruce Point Capital, strikes again with a short report on Canadian fintech Nuvei (NASDAQ:NVEI) — sending its stock down as much as 56% before part of its losses were recovered.

When investing gets real personal…

Spruce Point is an investment manager focusing on short-selling (i.e. betting against companies) — known for writing short reports which try to expose fraudulent companies. Spruce often holds short positions on these companies — meaning it benefits if the stock goes down.

In recent months, Spruce’s reports attacked Lightspeed, Oatly Group and Genius Sports among others — but shorting is a tough game…

• Some works: Oatly Group (NASDAQ:OTLY) and Lightspeed (NYSE:LSPD) are down over 50% since the reports.
• Some don’t: GFL Environment (NYSE:GFL) and Carvana (NASDAQ:CVNA) both rose over 75% in the year after the reports.

These reports can lead to further investigations e.g. Lightspeed’s case — which is now facing several ongoing lawsuits on making false and misleading statements.

And sometimes, it’s up to market forces…

Market conditions also play into Spruce’s bets. In a hot 2020 market, nearly all of their bets worked against them. 10 of the 11 companies it wrote about finished the year in the green — with an average return of 62%.

But this year, Spruce’s bets are down an average 25% — many of which are against high growth stocks that have fallen out of favor.

Nuvei had big gains before falling alongside a growth stocks sell-off in recent months. The report put a nail on Nuvei’s coffin — with accusations of:

• Going through multiple rebrands with shady business practices and hiring execs who were allegedly involved in fraud.
• Its CEO/founder falsifying educational credentials with execs and providing misleading organic growth claims.
• Acquiring companies from owners who were controversially tied to Ponzi schemes and fraud. Full report here.

Investors: White knight to the rescue

Citron Research — another popular short seller — tweeted “Buying $NVEI. Way oversold… Who cares if the CEO did not graduate college or has a driving record” — betting that there is no fraud.

Nuvei is only up 58% since its IPO in 2020 — far from its 270% gains at its peak this year.  During a BMO conference yesterday, its CEO, Phil Fayer, announced plans to respond aggressively to Spruce’s claims. Until then — investors are left in the dark.