Payments company Finablr has warned it is in danger of collapsing as trading in its shares was frozen by the Financial Conduct Authority (FCA).
In a dramatic update to the stock exchange this morning, the Travelex owner said it had found around $100m (£81m) of undisclosed financing, which meant it no longer had any certainty over its financial position.
Finablr said it had discovered $100m in undisclosed cheques made before its initial public offering in 2018 that may have been used as security for financing arrangements for the benefit of third parties.
Chief executive Promoth Manghat has resigned from the payments firm, which has appointed Kroll to carry out an independent investigation into its finances.
Shares in the Travelex owner had fallen 9.89 per cent this morning before the Financial Conduct Authority agreed to suspend trading.
The news marks the latest blow for the empire UAE-based billionaire BR Shetty, Finablr’s founder and majority owner.
Shetty also founded hospital operator NMC Health, whose shares were suspended last month after evidence of potential fraud was uncovered.
Shares in NMC had collapsed after US short seller Muddy Waters issued a report criticising the company’s accounting and governance in December. The FCA is investigating the company’s finances.
Some of the financial irregularities disclosed by NMC include off-balance sheet financing arrangements entered into without the board’s knowledge. Sister company Finablr now appears to be struggling with the same issue.
Finablr last week launched an internal investigation into its financial situation and said it would take steps to tackle a liquidity squeeze.
The payments company warned this morning that as a result of the liquidity squeeze and discovery of the undisclosed financing, its board is unable to accurately assess Finablr’s financial position.
“[Constraints] have become amplified and have now reached a point where they are having a material adverse impact on the company’s operations, including resulting in the company no longer being able to provide certain payment processing services,” it said.
“There is a material uncertainty about the group’s ability to continue as a going concern,” the company added.
A spokesperson from corporate governance specialist Pirc said the suspension of Finablr and NMC Health’s shares was “a historic financial and governance failure”.
They told City A.M. the situation “demands a proper response” from government and regulators.
“Listing rules must be revisited. The protections for minority shareholders in controlled companies must be enhanced,” they said.