Afterpay Touch shares fell another 6% yesterday as investor disquiet saw another round of selling with more than 4.5 million shares traded.
Yesterday’s fall took the loss since the most recent high of $25.64 last week to more than 20% at yesterday’s close of $20.27.
The most recent high last week came after the $317 million share issue ended successfully – as well as the $103 million raised by the three founders in selling of their shares to two US investment companies.
Those shares were sold at $23 each, so the investors who took up the issue (new and existing) and the two US groups who bought the owners stock, are looking at substantial losses.
The selling since last Wednesday has more than 24 million shares or around 12% of Afterpay’s issued capital change hands.
Much of that though will be shares from the issue as investors sold some of their lower priced holdings to try and balance their profits in a falling market.
Of course, for every seller, there’s a buyer, an optimist about the company but at the moment the selling pressure is greater than the support and driving the shares down.
The shares hit a two month low of $19.98 in trading on Monday.
The cause of the selling is of course AUSTRAC, (Australian Transaction Reports and Analysis Centre) which is the government’s financial intelligence agency that tracks payments in and out of the system.
It wants to know whether Afterpay has strong money laundering and anti-terrorism controls (or if it has them at all with some media reports they have little and the company only started improving its systems in this area last year).
AUSTRAC has told the company to find an independent auditor and pay for them to look at all their transactions since 2015 to see if the company checked and verified the credentials of each buyer and seller. Media reports suggest that may not be possible due to weak data and record keeping.
AUSTRAC last year handed out a huge $700 million fine to Commonwealth Bank for “serious breaches” (more than 56,000 individual) of anti-money laundering and counter-terrorism financing (AML/CTF) laws relating to the ‘Intelligent Deposit Machines’ (IDMs), (advanced ATMs installed by the CBA).
Last week Afterpay received an order from AUSTRAC to appoint an external auditor to carry out an audit of its AML/CTF compliance. That audit will look at a number of key areas from 19 January 2015 to date and the report is required to be lodged within 120 days of the appointment.
Afterpay’s problems are now impacting other buy now pay later stocks with shares in rivals Splitit and Zip Co falling by 5% and 2.7% respectively.
