Shares in Paysafe (PAYS) slumped more than 30 per cent on Tuesday morning after a short-seller levelled damaging claims against the FTSE 250 payment-processing and mobile wallets group. Spotlight Research accused Paysafe of having alleged links to online gambling operations in countries where gambling may be considered illegal.
It also claimed the company continued to run its Asian e-wallet business, Quick Access, for more than three years after management ostensibly shut it down over regulatory concerns. And it suggested the group may be exaggerating its earnings potential and cash generation.
Spotlight also suggested the remainder of earnings in its Paysafe voucher card business is at risk from new EU anti-money-laundering regulations due in 2017 and are aimed at eliminating anonymous payments, which Spotlight reckons is key to that particular part of the business.
Paysafe’s directors dismissed the material information in Spotlight’s report as factually inaccurate or previously disclosed. Paysafe highlighted the additional scrutiny the company received during its move to London’s main market just over a year ago. They also said that trading remained on track and reaffirmed upgraded forecasts from August of at least $970m (£767m) in revenue and $287m in adjusted cash profit this financial year. The brokers reiterated ‘buy’ or ‘overweight’ ratings after the claims.