US-based retailer Nuvei Corp has suffered a share price collapse of 27%, taking its market capitalisation from $850m to $560m, after short seller Spruce Point Capital Management reported allegations of accounting violations and “improper accounting”.
After a careful assessment of the facts, Spruce Point on Wednesday released a report that called into question the revenue Nuvei recorded in its most recent Q2 2018. The company, which has 436 stores in the US and Canada, reported profits of $84.2m in Q2 on revenues of $549.9m.
Spruce Point’s report, which analyzed the financial statements of the company, “strongly suggests accounting irregularities”, as well as an increase in Amazon and bricks-and-mortar brick-and-mortar stores. The short-seller accused the company of questionable accounting practices and misreporting its sales. The firm suggested that there may have been “moving parts” in what was considered an increase in sales in the last quarter of 2017 and that gross profit was being artificially inflated.
The report requested that the public be alerted to what it called “significant shortcomings in Nuvei’s reporting practices”, which if true, could have potentially let the company book substantial revenue through “relating transactions”.
The company said that it does not believe there are any irregularities and that it is “vigorously defending its financial statements against these baseless allegations”.
At the time of publication, the author did not own shares in any of the companies mentioned in this article.
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