Unfortunately for its shareholders, the Smart Parking Ltd (ASX: SPZ) share price is in freefall on Thursday.
At the time of writing the car park technology company's shares are down 50% to 22.5 cents. At one stage they were more than 55% lower at a 52-week low of 20 cents.
Why are Smart Parking's shares being crushed?
This morning Smart Parking provided the market with an update on its UK business.
According to the release, the company has become aware, through an internal audit and review process, of breaches of the company's corporate policies by its UK management team.
The review highlighted non-compliance in HR and operational controls, breaching its customer-focused strategy to build a positive and trusted brand in the UK parking enforcement market.
This has led to the Smart Parking board terminating the employment of both the UK managing director and finance director with immediate effect. The company's CEO and managing director, Paul Gillespie, has assumed the role of UK managing director on an interim basis.
Unfortunately for investors the company hasn't gone into any further detail about what exactly the breach was. But considering both directors were swiftly terminated, it appears to have been a very serious breach.
The concern I have now is whether this breach has damaged the company's reputation in the UK market, potentially stifling its future growth. Management intends to keep the market informed on developments and any financial impact.
In addition to this news, the company also took this opportunity to advise on trading conditions in the market. Due to poor weather conditions, business in the UK has been adversely impacted.
This has led to a sizeable decline in the issuance of parking breach notices in the third quarter of FY 2018 and delays in the roll out and go live process of new sites. Further, management predicts that breach notices will be impacted in the fourth quarter by 25%.
Should you buy the dip?
Until the full details of the breach are known I would stay clear of Smart Parking.
In the meantime, small cap tech shares such as ELMO Software Ltd (ASX: ELO) and Volpara Health Technologies Ltd (ASX: VHT) may be better options for investors.
