Shares in EML Payments tanked Wednesday after the firm confirmed that the Central Bank of Ireland is investigating breaches relating to money laundering and risk and control frameworks at Prepaid Financial Services, the Irish business acquired by the Australian vendor in 2020
EML on Tuesday called a temporary halt to trading in it shares pending further news from the Irish central bank on the regulatory probe into PFS Card Services Ireland Ltd (PCSIL).
Trading resumed Wednesay morning upon confirmation of the ongoing investigation, opening the floodgates to a wave of sell orders by insititutional investors that immediately wiped €500 million off EML's share price.
EML intially agreed a €253.8 million fee plus an earn-out component worth £55 million for Prepaid Financial Services in 2019, By the time the deal closed, it had negotiated a €105 million discount, citing "economic realities" from the Covd outbreak as its primary reason for revising the purchse price.
Investors were particularly spooked by EML's warning that the central bank is "minded to issues directions" to to PCSIL under Section 45 of the Central Bank (Supervision and Enforcement) Act 2013.
“The directions, if made, could materially impact the European operations of the Prepaid Financial Services business, including potentially restricting its activities under the Irish authorisation," says EML.
From January to March this year,PFS contributed 27% of EML's revenues. EML says that it is as yet "unable to estimate the potential direct and consequential costs" and impact of the CBI probe on the group's FY21 results.