NEW YORK (AP) -- Shares of Net 1 UEPS Technologies surged in midday trading on Wednesday as a South African appeal court upheld the company's contract with the South African Social Security Agency.
THE BACKGROUND: Net 1 UEPS Technologies Inc., a payment processing company, has operations in South Africa, South Korea, Ghana and Iraq. Its shares are listed on the Nasdaq and the Johannesburg Stock Exchange.
Late last year Net 1 disclosed in a regulatory filing that the U.S. Department of Justice and the Federal Bureau of Investigation were looking into whether it had violated the Foreign Corrupt Practices Act as well as other criminal and securities laws. The investigation aimed to determine whether the company made "corrupt payments" to South African government officials to win a contract with the country's Social Security Agency, according to the filing. The contract reportedly made Net 1 the sole provider of social welfare payments for five years.
Net 1 also said that the enforcement division of the Securities and Exchange Commission was conducting an investigation and that it was cooperating with the probes.
A statement from the company in December said that the investigation appeared to be linked to a dispute with AllPay Consolidated Investment Holdings, which also bid on the government contract awarded to Net 1 in January.
In August, a court ruled that the government's process for awarding the contract was "illegal and invalid" but stopped short of cancelling Net 1's contract. Both companies, along with the country's Social Security Agency, appealed the ruling to the South African Supreme Court of Appeal.
THE SPARK: On Wednesday Net 1 said that the South African Supreme Court of Appeal unanimously ruled that the process used by the South African Social Security Agency in awarding the contract to Net 1 subsidiary Cash Paymaster Services Ltd. was valid and legal.
Net 1 said that the contract between Cash Paymaster and the South African Social Security Agency to distribute social welfare grants to 10 million South Africans every month for a five-year period remains in full force and effect.
The company said in a statement that it may issue further comment on the judgment when it has had more time to study the full document.
SHARE ACTION: U.S.-listed shares of Net 1 climbed $1.33, or 22.1 percent, to $7.36. Over the past year, the stock has traded between $3.01 and $10.51. For the year to date, the shares are up 18 percent.