Home / Sector / Technology Shares / The EML Payments (ASX:EML) share price is falling today. Here's why

The EML Payments (ASX:EML) share price is falling today. Here's why

More nasty surprises from EML Payments' PFS acquisition have been sprung…

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Mitchell Lawler
Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.
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The EML Payments Ltd (ASX: EML) share price is moving south on Friday on its latest regulatory news.

At the time of writing, shares in the financial services company are trading down 2.48% to $3.54.

The EML share price is now 30% lower than it was prior to the Central Bank of Ireland voicing its concerns over anti-money laundering/counter-terrorism financing compliance.

A woman looks in anticipation at her laptop, watching eagerly.

Image source: Getty Images

Cough up the cash

Investors have been blindsided once again by issues stemming from the company's acquisition of Prepaid Financial Services (PFS).

According to the release, EML has identified historical deficiencies in cash for dormant and expired e-money accounts. Typically, these funds would be held in safeguarding accounts for six years after account expiration.

Additionally, the company explained these deficiencies pre-date the acquisition of PFS UK – which took place on 31 March 2020 and saw the EML share price soar by 70%. As a result, EML has reported the issue to the Financial Conduct Authority. The company expects to provide further details to the regulator over the coming weeks.

At this point in time, EML does not expect the event to have an impact on its profit and loss account. However, it does expect it will be required to inject £14.1 million ($26.6 million) into safeguarded accounts. At the end of June EML reported having $140 million in cash.

The safeguarded funds might be released back to the company if the accounts are not revived from a dormant state over an extended period.

EML share price damage

This latest development is in addition to the ongoing inspection by the Central Bank of Ireland. At this stage, shareholders are none the wiser regarding this matter.

Additionally, these matters come at an inconvenient time as EML tries to acquire Sentenial Limited and Nuapay. This acquisition remains subject to a nod from the Autorité de Contrôle Prudentiel et de Résolution (ACPR). Last we heard, the company expects the acquisition to be completed in the first quarter of FY22.

Finally, the regulatory matters have put a dent in the EML share price. Investors are down 14.9% since the start of 2021.

Motley Fool contributor Mitchell Lawler owns shares of EML Payments. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended EML Payments. The Motley Fool Australia owns shares of and has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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