A short seller just went after the fintech company Ryan Reynolds has a stake in — and it’s not the first time

Just a day after fintech firm Nuvei announced that actor Ryan Reynolds had taken a stake in the business, a short seller hit the company with a report urging investors to sell their shares.

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The report by the hedge fund and short-seller Spruce Point Capital Management accused Nuvei of a lack of transparency, the purchase of a US company that had exaggerated its growth, and links to failed crypto exchange FTX. Spruce Point said in its report that it would short Nuvei’s stock – or bet that the stock would fall – because of a potential 35% to 50% drop in value.

After the report was published, Nuvei’s shares fell by around 2%. The stock had risen by almost 65% since the start of 2023.

One of the concerns highlighted by Spruce Point included Reynolds’ investment in the company. It said the investment was announced while Nuvei was still dealing with the fallout from the revelation of its ties to FTX, suggesting Nuvei was using the news as a distraction.

“It is [Nuvei’s] the announcement that accomplished actor Ryan Reynolds made an ‘investment’ in Nuvei was a timely publicity endorsement, especially after we found broken links linking Nuvei to FTX,” the report said, referring to Internet hyperlinks that connected a top Nuvei executive to FTX scam.

“We first noticed that Nuvei made an unusually large $25 million restricted stock grant to an unnamed third-party consultant and did not disclose the nature of the services. Nuvei also backdated the recognition of the award,” said Spruce Point founder and chief investment officer Ben Axler. Fortune, suggests that Reynolds may have received his stake in exchange for promotional duties. Axler said the company was not upfront about the nature of Reynolds’ investment and whether it came from his personal funds.

“The announcement of the partnership with an actor like Reynolds reinforces our view that Nuvei’s underlying business is struggling,” Axler said.

Nuvei told Fortune in an earlier email before the short seller’s report that it could not disclose details of Reynolds’ stake because he is a private investor. Nuvei did not immediately return Fortuneits request for comment regarding the new short sellers report.

This is not Nuvei’s first clash with Spruce Point. In December 2021, the short seller issued a similar report with a “sell” recommendation, noting that the fintech company faced “40% to 60% long-term downside risk.” That report highlighted a number of alleged shortcomings in Nuvei’s operations, including senior management it said should not have been hired and poor financial performance.

At the time, Nuvei’s board rejected all accusations of violations of the law. The claims were all “misleading, false or unrelated to Nuvei’s business,” the company said in a statement released a week after Spruce Point’s report.

“The allegations against Nuvei are malicious and unfounded,” CEO Phil Fayer wrote. “We will not let the report distract us further, and we remain unwavering in our commitment to drive growth and value for our shareholders.”

Among the other concerns raised in the latest report is the $1.3 billion purchase of Paya, a US fintech company, announced in January. The agreement was Nuvei’s attempt to expand its reach to American users.

Spruce Point noted that the acquisition would “fail miserably to help Nuvei achieve its financial goals,” adding that Paya reportedly only had 80,000 customers, after stating in 2020 that its user base had dropped from 1 million to 100,000 .It also said that Paya’s growth faced many obstacles, which could also drag Nuvei’s business down.

“In our view, Nuvei’s leadership does not lack credibility and is undisciplined with spending, but the bankers still allow it to run wasteful activities,” Spruce Point’s report said. “We believe that Nuvei’s $1.3 billion purchase of Paya appears to be a marriage of two weak industry players and masks Nuvei’s underlying organic deterioration.”

Spruce Point said: “Nuveis’ investors, bankers, auditors and analysts are wrongly supporting a troubled company.” Axler told Fortune that a separate committee should be set up to look at the report’s findings together with an independent forensic firm.

In previous reports, Spruce Point has targeted other companies, including shoe brand Skechers and artificial intelligence company C3 AI.

While Spruce Point has extensive experience in targeting companies, investment bank Keefe, Bruyette & Woods believes the report leaves unanswered questions.

“Like the previous report, we believe the short seller is seizing on irregularities without citing material and provable issues,” Sanjay Sakhrani, an analyst at the investment bank, said in a note to investors, Bloomberg reported. “While we respect the investor’s investigative approach, it is difficult for us to connect all the dots and understand that something is actually wrong with the company.”

This story was originally featured on Fortune.com

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