Shares of USA Technologies (OTC:USAT) fell more than 17% on Wednesday morning after the networking and cashless transaction company admitted it is unlikely to meet a Sept. 9 deadline to file its financial statements with the Securities and Exchange Commission. The company is seeking additional time, but if it fails to get it, USA Technologies could face a delisting due to its issues.
USA Technologies has had a tough run in 2019, with its shares losing more than half of their value on one February day after the company revealed its auditor, RSM, was resigning. In conjunction with the resignation, USA Technologies' board said that some financial statements and related press releases are not reliable.
The issues surfaced during an internal probe that USA Technologies initiated late last year. USA Technologies is behind in filing its annual report for the fiscal year ending June 30, 2018, and recent quarterly reports.
USA Technologies is not in compliance with Nasdaq listing rules, which require companies to timely file all required periodic financial reports, but it believes it will be able to file by Sept. 23. USA Technologies has submitted a letter to the Nasdaq Hearings Panel requesting an exemption until that date to get into compliance.
There is no assurance that the Nasdaq panel will grant the extension, though the exchanges tend to give companies considerable leeway if they are attempting to be as transparent with investors as possible and are seemingly working toward resolving their issues. USA Technologies seems to be on the right track.
The company has some heavy hitters in its camp. Hedge fund Hudson Executive Capital, which is run by former JPMorgan Chase CFO Douglas Braunstein, disclosed a 12% stake in May.
USA Technologies has its share of challenges, and is a long way from being among the top tech stocks to invest in. But the market's reaction on Wednesday seems overdone. For investors with a high risk tolerance, this is a situation worth watching closely.