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Roku's Rising, but This Nasdaq Highflier Just Got Crushed

The stock market has done quite well this week, but Wall Street hit some turbulence on Wednesday morning. With conflicting readings on just how serious the omicron COVID-19 variant might become across the globe, investors aren't quite sure whether to zig or zag. As of 11:15 a.m. ET, the Nasdaq Composite (NASDAQINDEX: ^IXIC) managed to hold onto gains of about 0.1%, but most other major benchmarks were lower on the day.

One stock that helped the Nasdaq maintain an even keel on Wednesday was Roku (NASDAQ: ROKU), which announced a lucrative deal that will keep a key content provider on its platform. However, another stock that has performed exceptionally well on the Nasdaq found itself facing massive losses, shocking shareholders. Below, we'll look at why Roku's on the move and then reveal which stock is getting taken to the woodshed early Wednesday.

Roku makes a deal

Shares of Roku were higher by 13% on Wednesday morning. The streaming television specialist secured a key agreement that will ensure that a valuable content provider will remain available on its platform.

Image source: Getty Images.

Roku and the YouTube video unit of Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) announced that they had come to terms on a multiyear agreement under which Roku users will be able to keep watching YouTube and YouTube TV content. That had been in doubt because of ongoing disputes between the two companies.

Roku had argued that YouTube was taking improper actions that weren't fair to the connected TV specialist, while YouTube rebutted that Roku's own strong position in streaming video was creating competitive issues of its own. Roku even took YouTube TV's app off its store listing, and YouTube responded with threats to withdraw its namesake web-based app from the platform.

In the end, Roku stands to gain a lot more from the deal than the much larger YouTube. Shareholders seem to recognize that, and that's why the stock is heading higher after a prolonged downward move that has seen the share price get cut in half since July.

The latest victim of short-selling research

Meanwhile, one of the biggest losers on the Nasdaq was Nuvei (NASDAQ: NVEI). The Canadian payment processing stock received harsh criticism from short-selling research company Spruce Point Capital Management that called its business model into question.

Spruce Point cited a "pattern of business failures, lack of organic growth, and a web of relationships with individuals connected to major Ponzi schemes and alleged fraudulent activities" in its commentary, characterizing Nuvei's financial disclosures as "weak." The research firm sees risk that Nuvei's stock could fall 40% to 60%, which the market promptly delivered.

Interestingly, the move lower has drawn commentary even from fellow short-selling researchers. Citron Research tweeted that it believed the move lower in Nuvei shares had the stock "way oversold," and while it isn't defending Nuvei, it asserted that allegations of fraud aren't as strong as actual proof of fraud would be.

Nuvei CEO Philip Fayer recently joined The Motley Fool's Industry Focus podcast to talk about the company and its prospects. Thus far, Nuvei hasn't responded to the report, but it'll be interesting to see what the inevitable response does to restore investor confidence and address Spruce Point's allegations.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Dan Caplinger owns shares of Alphabet (A shares) and Alphabet (C shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Nuvei Corporation, and Roku. The Motley Fool has a disclosure policy.


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