Investing.com -- Shares of Marqeta (NASDAQ: MQ ) tumbled 7% following a report from J Capital Research that cast doubt on the company’s business model and regulatory standing. The short seller’s analysis, released today, describes Marqeta as a payment processor heavily reliant on partnerships with smaller banks for its Banking as a Service (BaaS) model, a sector that has recently seen heightened regulatory scrutiny and several business closures.
The report highlights an FBI investigation into Marqeta’s partner, Sutton Bank, for potential anti-money laundering (AML) failures. It also points to the company’s largest client, Cash App, and the regulatory pressure it has faced, which could significantly impact Marqeta if its banking partner were to fail or end their relationship. According to J Capital Research, Marqeta’s business has suffered as larger banks begin to disintermediate companies like Marqeta, and the company’s attempts to diversify away from the risky Cash App processing business have not been successful.
Marqeta’s stock decline also reflects concerns over its revenue concentration and the BaaS industry’s future. The report suggests that the company’s contracted backlog has decreased since the first quarter of 2024, indicating potential future revenue challenges. Additionally, the report calls into question Marqeta’s financial health, citing a decline in gross profit margins and an overreliance on a single client, despite reported growth in those areas.
The short seller’s analysis paints a bleak picture for Marqeta, with comparisons to outdated business models and descriptions of the company as a "dinosaur." It also notes that recent executive changes, including the departure of CEO Simon Khalaf in February 2025, signal internal turmoil.
Marqeta’s stock movement today reflects investor concerns over the company’s ability to navigate the increasingly challenging regulatory landscape and maintain its revenue streams amidst the BaaS sector’s instability. The company’s future, particularly in the second quarter and fiscal year 2025, remains uncertain as it contends with these industry-wide headwinds and internal challenges.
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