Shift4 Payments (NYSE: FOUR) stock price has pulled back violently in the past few days as investors focus on a short-seller report. The shares plunged to a low of $57.87, the lowest level since February 28. In all, the shares have plunged by more than 20% from the year-to-date high. It has jumped by more than 17% this year.
Blue Orca short report on Shift4 Payments
The main reason for the collapse of Shift4 Payments is a short-seller report that alleged several important issues in the company. The core argument is that the company markets itself as a fintech firm that is fast growing while it is an old-school PoS provider.
Also, the short-sellers noted that the company was aggressively manipulating its financials in a bid to boost its performance. They identified areas where the company acquired distributors and manipulated its cash flows.
Further, Blue Orca noted that the CEO had involved in questionable activities meant to boost the share price. For one, as the Shift4 Payments stock price plunged, he said that he was prepared to take the company private because it was very undervalued. In reality, he was actively selling the shares, according to insider data.
Blue Orca’s short report on Shift4 Payments also saw its Chief Financial Officer depart last year as some Wall Street analysts questioned the company. In terms of weak corporate governance, the report questioned why the company had too much related party transactions, including payments to the CEO’s private jet company.
I believe that Blue Orca’s argument against the company is well-researched and contains many accurate representations. These issues could affect the future performance of the stock as more holders start selling.
It is worth noting that other similar companies have received some short-seller attention recently. In March, Hindenburg Research targeted Block, the parent company of Square, as we wrote here. And this week, another report targeted Nuvei, a Canadian fintech company that provides payment solutions to gambling and crypto companies.
Shift4 Payments stock price forecast
SHIFT chart by TradingView
The daily chart shows that the SHIFT stock price has nosedived in the past few days. In this period, the shares have managed to move below the 25-day and 50-day moving averages. The decline happened as the two lines of the rising wedge pattern were about to reach a confluence level.
The shares also plunged below the important resistance point at $66.55, the highest point in May this year. Therefore, because of the rising wedge pattern and the short-seller report, there is a likelihood that the stock will continue falling as sellers target the next key support level at $50. A move above the resistance point at $66.50 will invalidate the bearish view.
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