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Investing.com -- Worldline SA (EPA:WLN) shares fell sharply on Friday, tumbling more than 7% and extending its recent sharp declines after French investigative outlet Mediapart reported on Wednesday that the payment services company had knowingly maintained relationships with online merchants of questionable repute, including gambling, pornography, and prostitution platforms.
Worldline stock crashed nearly 40% on Wednesday, with Mediapart being one of the European media outlets that published allegations against the company. Other outlets also accused Worldline of covering up client fraud to protect revenue.
The Mediapart report claimed that the company not only tolerated but actively pursued such clients, and continued doing so even after pledging to tighten its risk policies in mid-2023.
While similar concerns surfaced during a 2023 BaFin audit, the reports also mention Worldline’s payment orchestration operations in Sweden.
“The only new element for us (not denied by Worldline) comes from its payment orchestration activity in Sweden, which appears to us to be a grey area, from the moment that the group as a technical operator (and not a commercial acquirer) is not obliged to carry out KYC or monitor payment flows,” Bernstein analysts said.
They add that “50% of the volume of this platform is carried out outside regulated industries.”
Bernstein analysts noted that in the worst-case scenario, reputational damage could threaten Worldline’s regulatory standing, though they view this as unlikely.
“In a more realistic scenario,” they wrote, “regulators may decide to further increase their anti-fraud and anti-money laundering requirements.”
Exploring potential reactions to the report, the analysts suggested that Worldline could take legal action against the journalists who wrote the article if it believes the reports are false.
Alternatively, an external audit could help restore investor confidence, they said.
JPMorgan analysts also commented on the developments, noting that “existing and new customer conversations were likely to be more challenging given the reputational hit.”
The bank also addressed investor speculation about the viability of Worldline’s joint venture with Crédit Agricole and potential acquisition interest.
It believes the JV is unlikely to be unwound, as the reported issues were “fully known by Crédit Agricole at the time they made their equity investment.”
With Worldline’s market cap now around €900 million and approximately €1.8 billion in cash on its balance sheet as of end-2024, investors have begun to question whether the company could become a takeover target.
JPMorgan views private equity as the “most feasible route,” though any buyer would need to be comfortable with the turnaround still underway.