The iSignthis Ltd (ASX: ISX) share price was trading 10% lower today after it said it is proactively working with ASIC, the financial services regulator, with regards to some client funds.
Since hitting a high over $1.60 earlier this month, shares of iSignthis Ltd are today trading below $1. For comparison, the S&P/ASX 200 (INDEXASX: XJO) has risen 5% in the past month.
About iSignthis Ltd
iSignthis is listed on the ASX and Frankfurt Stock Exchange. It provides remote identity verification and payment authentication combined with e-money, transactional banking, IBAN issue and payment processing capability.
Its products and businesses are iSignthis Paydentity, ISXPay, UAB Baltic Banking Service and Probanx Information Systems.
Client Funds Restated?
Against a backlash of criticism from the financial media and governance firms, iSignthis today announced, via the ASX, that it would restate funds held on behalf of two clients.
iSignthis said the matter was previously disclosed to investors on page 11 of its 2019 half-year financial year but the funds would transfer from, “‘on balance sheet’ to ‘off balance sheet’”.
“The Company’s net assets on the balance sheet remain unchanged,” iSignthis said.
iSignthis said it continues to hold the funds until ASIC or the Court instructs them otherwise.
“These merchants are no longer active customers of iSignthis, with the processing of transactions and revenue generation ceased over a year ago in March 2018. The current actual GPTV figures and EBIT projections do not include these merchants.”
AML Compliance Update
iSignthis also took the opportunity to reiterate that it is operating an “extensive” Anti-Money Laundering (AML)/Countering Financing of Terrorism (CFT) program.
The second part of the iSignthis announcement read:
“The Company continues to process transactions at a growing rate, and is proactively working with regulators to ensure that it adheres or exceeds regulatory requirements during this growth phase.”
This comes after a joint investigation by the Australian Financial Review and Danish outlet Børsen claimed that a European bank flagged payments from an iSignthis subsidiary in June 2018 as suspicious.
iSignthis CEO John Karantzis appeared to take to Twitter to settle the concerns.
“I was asked today by a journalist about AML Suspicious Matter Reports, and if I can comment on them. Legally, I can’t.”
Karantzis added, “I will say that it would likely be suspicious if a Monetary FI like us didn’t have any at all, especially with our growing daily volumes!”
I was asked today by a journalist about AML Suspicious Matter Reports, and if I can comment on them. Legally, I can't. I will say that it would likely be suspicious if a Monetary FI like us didn't have any at all, especially with o…https://t.co/0bgVq8CAbo https://t.co/9mzkkQ5eVL
— N Karantzis (@Yianni_x) September 23, 2019
Buy, Hold or Sell?
I’ve realised that companies which purport to be growing fast will quickly attract the usual cohort of promotional investors and their believers. Unfortunately, at a certain point in time, this attraction will pique the attention of experienced investors and journalists.
Some companies are able to shrug off the negative press and skepticism of seasoned investors that almost inevitably ensues. Many companies cannot.
If you ask me, questions about governance aside, I can’t justify the current valuation of iSignthis shares enough to feel confident that owning them would be a good idea.
If you’re tempted to buy shares, why not take your time and first consider shares of fellow ASX payments technology businesses like EML Payments (ASX: EML), Afterpay Ltd (ASX: APT) and Splitit Ltd (ASX: SPT)?
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Disclosure: At the time of publishing, Owen does not have a financial interest in any of the companies mentioned.
