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Unicorn Dehorners | Press

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It’s still amazing. In just a matter of weeks, two of our largest recently listed tech companies on the Toronto Stock Exchange, Lightspeed and Nuvei, saw their stock market values ​​plummet by billions following the release of analytical reports. devastating, broadcast for the sole purpose of generating a wave of panic and enriching the firm that wrote them.

Lightspeed and Nuvei are two companies active in the field of electronic payment solutions. Lightspeed develops point-of-sale and e-commerce software, while Nuvei offers electronic payment processing systems.

The two companies are established in Montreal and both had unicorn status before their IPO, that is to say they had been attributed a value of more than 1 billion by investors, so much recognized promising potential.

Lightspeed went public in September 2019 with an initial valuation of 1.7 billion while Nuvei went public in September 2020 at a starting value of 3 billion. Carried by the wave of tech on the stock market, amplified by the new reality induced by the coronavirus pandemic, our two unicorns quickly crossed the mark of 20 billion valuations each.

Until recently, therefore, everything was going smoothly for these two unicorns, until the activist investment firm Spruce Point Capital Management came to town and took on Lightspeed, last September.

This New York investment firm specializes in short selling; that is, it borrows shares hoping that their value will fall so that they can buy them back later at a lower price. In short, it makes substantial profits when the value of the stocks it targets declines significantly.

In a first 125-page report, published on September 29, Spruce Point accuses Litghtspeed of lacking transparency in revealing key information while overstating its growth prospects. The financial and competitive reality is less rosy than the company, whose stock price is clearly overvalued, claims the activist investor.


Immediately after the publication of this report, Lightspeed’s stock value drops 12% in one day, from $ 160 to $ 126. Since then, the stock has steadily declined to close last Friday at $ 52, which values ​​the company at 7.5 billion. A first unicorn has been dog-eared.

Two weeks ago, it was Nuvei’s turn to taste the medicine from the short-selling investment firm, which on December 8 produced a new report just as devastating as Lightspeed’s about it, in which she questions the financial data of the Montreal company, its past and that of some of its leaders.

The crash was more devastating as the value of Nuvei’s stock fell 40% in a single day and the stock, which had peaked at $ 180 in September, fell to $ 73.


Nuvei’s stock closed at $ 70.49 on Friday, assigning a valuation of $ 9 billion to the company which was worth more than $ 20 billion three months ago. A second unicorn was dogged by Spruce Point Capital.

Calumny pays off

This is not the first time that Spruce Capital has attacked a Quebec company. She had already done it with Dollarama in 2018. The modus operandi was the same: produce a damning report on the company, generate reasonable doubt as to the validity of its results and forecasts, and hope for a drop in the value of the stock to sell the stock short.

The worst part is that this practice is completely legal even if it costs billions of dollars in value to small investors who are then solicited by law firms to participate in class actions against the leaders of the apparently faulty company that did not correctly disclose the desired financial information.

At the Autorité des marchés financiers (AMF), I am confirmed that the allegations made in the analysis reports made by activist investors who sell short are examined and accepted as long as the information disclosed is not false or misleading. .

“At the AMF, we analyze these files regularly. Our teams assess the content of investment firm reports and compare them with information from issuing companies. We ask companies for confirmations on certain allegations and if we assess that there is fraudulent information, we can initiate an investigation against the activist investor, ”explains Jean-François Fortin, director general of market control.

The reality, however, is that there has never been an investigation in Canada that has demonstrated in black and white that the negative information formulated against a company management and its financial results had been fraudulent to the point. lead to massive sell-off of stocks by investors.

The militants manage to inflate facts or to overestimate particular situations without going beyond the line of legality, it is their vision of things against that of the company that they vilify.

And in the cases of Lightspeed and Nuvei, their market valuation was so boosted by the exuberance of tech stocks – Lightspeed’s was trading at a ratio of 23 times the value of sales in the year 2022! – that they were perfect targets for a correction.

It is sometimes even said that the action of activist investors allows the companies they have targeted to correct certain shortcomings that are decried in their damning report.

Still, I would be curious to know how much Spruce Point Capital has pocketed in the space of three months by selling short its titles of Lightspeed and Nuvei when these companies have just erased 20 billion of market value during the same period. of time.



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