Citron Buys The Dip In Nuvei, Says 'No Proof Of Fraud' In New Short Seller Report

Nuvei Corp NVEI shares dropped 36% on Wednesday after a new short seller report by Spruce Point Capital Management slammed the stock and suggested the company’s management has a track record of nefarious activities. However, Citron Research executive editor Andrew Left took to Twitter on Wednesday to defend the company’s financials and announce he is taking a long position in the stock.

Spruce Point Allegations: In its report, Spruce Point alleged Nuveui 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.”

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Spruce Point claims Nuvei CEO Phil Fayer embellished his education credentials during his previous role at PaySystems, a payment company that ultimately collapsed amid merchant allegations of fraud against Fayer.

In addition, the short seller claimed Nuvei’s executive vice president of partnerships and chief legal council recently disappeared from the company’s website without any explanation from Nuvei.

Spruce Point alleges Nuvei predecessor Pivotal Payments was not growing revenue from 2010 through 2018 until the company secured a new round of private funding and began a strategy of European acquisitions.

Today, Nuvei reports expanding European margins and positive cash flow.

“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,” Spruce Point wrote in the report.

“Nuvei commands a premium valuation, but we believe it should trade at a discount to incorporate our documented concerns.”

Spruce Point also included a target price range for the stock of between $39 and $58 per share, representing at least 40% downside from Tuesday’s closing price.

Left Buys The Dip: After Wednesday’s crash, Left tweeted that he bought the dip in Nuvei. “Spruce report says word fraud 48 times..yet no proof of fraud. Easy to find cust. complaints on any company. Who cares if CEO did not graduate college or has a driving record,” Left said.

Left also pointed out that Nuvei’s financials have been audited by PricewaterhouseCoopers, an extremely reputable auditing firm.

“We are not defending omitting info from bio or mgt. We are suggesting through experience that stock is oversold on this report,” Left said.

He went on to praise the investigative work conducted by Spruce Point but said he is betting on PriceWaterhouseCooper’s audit over Spruce Point’s investigation.

Nuvei did not immediately respond to Benzinga’s request for comment.

Benzinga’s Take: Left certainly seems to have a point that there doesn’t appear to be any clear-cut evidence of fraud in the Spruce Point report. However, if Spruce Point’s claims about the company and its management omitting important disclosures are true, investors may still choose to avoid the stock.