Why the EML Payments share price is plunging today
The payment services company’s shares are up 16% in the last year.
Shares in EML Payments (ASX: EML) are the top traded shares on the ASX boards in early trading on Friday, and also the worst performing. At the time of writing, the stock had slid more than 11% to $3.28.
What has rocked the EML stock price?
EML shares have taken a hit after the digital banking and payments services business flagged that the Central Bank of Ireland (CBI) had imposed restrictions on its recently acquired Ireland-based business, Prepaid Financial Services (PFS).
The company said in a statement that the Irish central bank had asked it to restrict growth of the division until a remediation program relating to Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) concerns is completed.
EML shares had slid more than 40% in a single session in May when the Irish central bank first raised concerns about the AML/CTF risk and control frameworks and governance at PFS’s card services business. The company has been working with the regulators on resolving the issues since then.
Overnight, the company said PFS had received further correspondence from the central bank on the issue.
“As presently framed, EML considers that the directions could materially impact the European operations of the Prepaid Financial Services business,” EML said.
The PFS subsidiary had in recent months submitted a proposal outlining its growth plans, but this was rejected by the Irish central bank which wants a lower, more moderate growth for the company, the Australian company said.
EML completed the acquisition of the Ireland-based PFS in March 2020, after renegotiating the deal, for a whopping $362 million.
EML had originally signed the acquisition deal in November 2019 in an effort to catapult EML into the digital banking space and beef up its prepaid cards offerings. The acquisition has been key to raising business momentum, leading EML to reinstate earnings guidance in February, following a COVID-19 dip.
In August, EML had flagged that the PFS remediation program would end in the first quarter of calendar 2022, and had also budgeted $11.4 million to cover all costs. The timing and cost estimate had not changed, CEO Tom Cregan said.
However, retail investors who have piled into EML shares mainly for its high growth business will now be concerned about these prospects. The EML stock is still up more than 16% over the last 12 months.
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