By Charlie Conchie
Investors in troubled money-transfer firm Wise “should be concerned” by the regulatory investigation into its chief Kristo Kaarmann as it threatens to “dampen shareholder value”, a top advisory group has warned.
The Financial Conduct Authority revealed in June it had opened an investigation into the Estonian founder after tax authorities ruled in 2021 that he deliberately defaulted on a £720,000 tax bill.
Wise is set to face down shareholders next Friday, where there will be a vote on the re-election of directors, including founder and chief executive Käärmann. The regulator is yet to provide an assessment on whether he is a ‘fit and proper’ person to be running the firm.
Influential shareholder advisory group Glass Lewis has now warned investors that any regulatory investigations into directors should be a cause for concern and said that legal proceedings could dent the valuation of the firm, which floated on the London Stock Exchange in July last year.
“The subject of the investigation, CEO, Kristo Käärmann controls approximately 18.16 per cent of the company’s issued share capital, potentially damaging shareholder value,” the group warned.
Glass Lewis said it would back Käärmann’s reelection as a director at the meeting but warned this may change if any bosses are implicated in legal proceedings. “Due to the ongoing nature of this investigation, we do not feel that any such action is necessary at this time,” it added.
Wise declined to comment on Glass Lewis’ warnings, but has said previously that Kaarmann is cooperating with the FCA and that the firm takes the case “very seriously”.
The woes of Wise have been building in recent months after the firm’s Abu Dhabi subsidiary was slapped with a $360,000 fine over failures in anti-money laundering (AML) controls.
Abu Dhabi Global Market’s Financial Services Regulatory Authority said the firm had failed to “establish and maintain adequate AML systems and controls to ensure full compliance with its AML obligations”.
Wise has been enjoying a jump in its share price, however, with the firm’s valuation climbing 70 per cent since July. It is still trading down around 45 per cent on its £9bn IPO valuation.
In a quarterly update in July, Wise said revenues had jumped to £185.9m in the first quarter after a surge in transactions on its platform.
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