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  "documentTitle": "Nuvei Corp (NVEI)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Spruce Point Capital Management",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2021-12-09 00:00:00",
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      "text": "We believe Nuvei makes it difficult to ascertain its true organic growth since it came public.",
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      "text": "Based on our conversations with former employees, and a comment made by SafeCharge's former CEO, we believe it was facing competitive challenges in the North American market, and consolidation was desirable. Nuvei spent approximately $900m to acquire SafeCharge in 2019, which increased its exposure to the European gaming industry. SafeCharge was co-founded by Teddy Sagi, who first made headlines in Israel in 1994 when he was arrested and charged with manipulating the value of stock in a widespread banking fraud. Based on our research, we believe SafeCharge's growth prospects were waning and that the integration didn't go according to plan. As one former employee commented, \"Targets for integration and migration were unrealistic. I think their understanding of the variances and the level of effort it was going to require to take the SafeCharge platform to North America was underestimated.\" Due to accounting changes and opaque financial reporting post close, Nuvei has made it difficult to ascertain SafeCharge's growth profile. In the pre-acquisition 2018 period, SafeCharge reported revenue growth of 24%, but profit margin fell by 340 basis points. Under Nuvei in 2019, we estimate SafeCharge's revenue grew 20%, yet profit margins expanded 2,060 basis points. Nuvei admits, \"SafeCharge and Smart2Pay have a higher relative cost of revenue than Nuvei's operation in the North American market due to costs associated with its merchant servicing model.\" Furthermore, Nuvei disclosed just $1.2m of severance and integration costs in 2019, a minimal amount that could hardly explain such significant profit margin expansion. We call on Nuvei to explain how this is possible? Also during the course of our research, a former employee told us that recent performance has been inflated by two customers and SafeCharge acquired a very large gambling contract (one of the biggest in the UK), which contributed a lot to growth. If this is the case, we believe Nuvei has not been transparent about growth",
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      "text": "By using the Wayback Machine, and looking carefully at CEO Fayer's biography, we see that Pivotal claimed 90,000 merchants starting from Nov 2015 – July 2017. This figure declined to 70,000 merchants in March 2019. Currently, it claims 50,000+ merchants as of 12/31/20 and does not provide quarterly updates. Nuvei's IPO risk factors still claim a dependence on small and medium-sized (SMB) business, but it has been talking up its focus on larger enterprises. Yet, Nuvei does not quantify exposures to SMBs vs. enterprise customers. Old press articles indicate Pivotal had approximately $150m of sales in 2010 and was growing 25% to 45% per year. In its IPO prospectus, it reported approximately $150m of sales in 2018, which suggests a long period of no growth. We believe Nuvei makes it difficult to ascertain its true organic growth since it came public. However, by looking at 2020 geographic segment reporting, and assuming that its SafeCharge acquisition accounted for all foreign revenue contribution, we observe that both U.S. and Canadian revenues declined organically by -3.3% and -7.6%, respectively. Nuvei doesn't provide quarterly geographic revenue to see how trends have progressed in 2021",
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      "text": "organic growth: 40% - 60%",
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      "kind": "other",
      "text": "Evidence of North American Organic Growth Declining",
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      "kind": "other",
      "text": "SafeCharge First Pivot To European Acquisitions While Providing Limited Disclosures Margin Expansion of 2,060bps Hard To Reconcile",
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      "kind": "quote",
      "text": "\"Targets for integration and migration were unrealistic. I think their understanding of the variances and the level of effort it was going to require to take the SafeCharge platform to North America was underestimated.\" — Former employee",
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      "kind": "title",
      "text": "Spruce Point Estimates 40% - 60% ($39 - $58/sh) Downside Risk To Nuvei Corp (NVEI) Share Price",
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