I opened Facebook to check if any of the subscribers had caught it and Miguel Passinhas Rodrigues had shared the news. Thanks Miguel.

I then went on to read the news:

FBI Raids Chinese Point-of-Sale Giant PAX Technology

FBI Jacksonville, Homeland Security agents investigating outside Southside business

It turns out that the FBI believes that Pax’s terminals have been involved in cyber attacks in the US and Europe. Here’s the gist of it:

“the FBI began investigating PAX after a major U.S. payment processor started asking questions about unusual network packets originating from the company’s payment terminals. 

According to that source, the payment processor found that the PAX terminals were being used both as a malware “dropper” — a repository for malicious files — and as “command-and-control” locations for staging attacks and collecting information.“

Yikes. Definitely not good news. Not good at all!

As usual in this type of situations, the information that is made public is limited. One of the sources mentions that “PAX is now claiming that the investigation is racially and politically motivated.“.

I had thought about this before, but I don’t think I have ever put it to writing. 

How was the US looking at a Chinese player becoming the world leader in Point-of-Sales terminals? Remember Huawei?

If the FBI suspicions are indeed true, the question arises: Was this perpetrated by Pax Global or was the company victim of a hack? 

Right now the trading of the stock has been halted so there’s not much that we can do, but depending on what news will follow we could be seeing the share price tank another 90%.

So the question that arises is what should I do? Should I sell, should I hold, or should I be buying more? I think it’s evident that I won’t be buying more.

First of all, I don’t think the FBI would perform an investigation and get a judge to authorize the search if it didn’t have enough evidence to conclude that something was indeed wrong.

Then, even if the company has no fault at all and this was a hack, the payments industry is based on trust. How big can this be and how hard can it hit Pax?

Third, even if this was all just politically motivated, why would the FBI stop here?

The best outcome for Pax would be that it had been hacked and the problem was easy to fix. There have been some security alerts by industry experts before and the company was quick to address the issues. Maybe the same could happen now?

Either way we put it, things aren’t looking good for Pax.

CONCLUSION

As no one teaches you what to do when the FBI raids one of your companies under the allegations of cyber-attacks, any investment decision is highly prone to being wrong.

That being said, my intention is to sell all my shares of Pax once the trading resumes. 

But as the trading has been halted, we get the chance to wait for further information that may help us make a more informed decision.

I’ll keep following Pax Global up close and I’ll let you know of the updates.