CAB Payments shareholders feel misled over risks after flop float
UK regulators have been called on to investigate whether CAB Payments misled shareholders in the prospectus for its initial public offering, according to a report by The Times on Monday.
RC Brown and Polar Capital, two investment funds that featured in the top 20 shareholders of the company, are understood to be among those alleging that the risks in CAB’s West African markets were not fully disclosed.
The foreign exchange floated with a valuation of £851 million in July and joined the FTSE 250 index in mid-September. However, CAB’s market capitalisation has since collapsed to £173 million following a profit warning late last month. This makes it the worst-performing IPO of this year, according to data from Bloomberg.
CAB slashed its outlook for annual revenue by almost a fifth after a steep drop in the Nigerian naira and central bank interventions in the Central African franc and West African franc hurt its profit margin and transaction volumes.
It said it had seen a number of changes to market conditions in some of its “key currency corridors” and warned that these challenges were “recent but continuing”.
In its prospectus, CAB had mentioned problems with the Central and West African francs twice. It said there could be no guarantee that growth experienced in these markets would be sustained and warned that its financial results could be negatively affected by “significantly improved liquidity or other conditions” in these markets.
Oliver Brown, investment director at RC Brown, told The Times: “My initial thought was, we’re all grown up and we all have our eyes open to investments but it does appear that there should have been more disclosure that the company operates in, to put it diplomatically, parallel markets. There has been more than an element of the advisers turning a blind eye to that.
“There’s only so much you can put in a risk document but the fact that they have been operating in a market where it appears other major competitors are not, these parallel markets that others would not touch, that is worthy of a risk disclosure.”
The Financial Conduct Authority vets prospectuses but is not responsible for due diligence.
Shares in CAB Payments were up 3.1 per cent at 70.32 pence on Monday morning in London.