Explains why the sell downUS activist Alta Fox reduces EML...

Explains why the sell down
US activist Alta Fox reduces EML stake

Emma Rapaport

Alta Fox Capital Alta Fox has reduced its stake in bombed-out EML Payments to 8.14 per cent. The US activist investor said it’s a “long-term investor” and has “no intention to sell any additional EML shares”.

“Alta Fox has a long history as an investor in EML. EML has a collection of great businesses around the world, and we look forward to supporting its continued growth,” founder Connor Haley said.

EML shareholder Ron Shamgar, head of Australian equities at boutique firm TAMIM Asset Management, said the sale represented a forced sale to satisfy regulatory requirements rather than a loss of confidence.

“They just received bad legal advice when they first acquired their shares,” he said.

“Alta Fox wasn’t aware that once you own 10 per cent and have a director, since you have control over the company, certain banking jurisdictions, especially with the Central Bank of Ireland, don’t allow you to be a director and a substantial shareholder unless you pass all the regulatory approvals.

“It would have been difficult for Connor Haley to pass. It’s clear from the announcement that if they go to 8 per cent, they can avoid that issue.”

EML is facing an uphill battle to restore credibility with European regulators amid a major board reshuffle.

The fintech has been weighed down by a series of regulatory problems, triggered by intense scrutiny by the Central Bank of Ireland that considered its prepaid cards created significant money-laundering risk.

Shamgar is calling on Alta Fox to make senior management changes, cut costs and offload the Irish Prepaid Financial Services business.