Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Wirecard AG (WDI AG): There Are No Reasons to Hold the Stock...

Wirecard AG: Balance Sheet Indicates the Truth

Quiddity Advisors

Event-Driven

Early Thursday morning Europe time, <a href="https://www.smartkarma.com/entities/wirecard-ag" target="_blank" data-smartkarma-citation="entities:21743:1" rel="noopener">Wirecard AG (WDI GR)</a> announced that it would not be unveiling its 2019 audited accounts today. Results had already been delayed three times and the Annual Meeting pushed back to late August.Preliminary results released in February 2020 said Wirecard had 2019 revenue growth of 38% to €2.8bn ($3.05bn) and EBITDA of €785m.<ul>
<li>Audited results were initially scheduled for 8 April, but that got delayed until April 30 as KPMG was completing an independent probe into allegations of accounting impropriety (the probe had originally been announced in late October 2019). <ul><li>Note that Wirecard had <a href="https://ir.wirecard.com/websites/wirecard/English/5110/news-detail.html?newsID=1923069&amp;fromID=5000" target="_blank" rel="noopener">announced</a> 12 March that the KPMG probe was largely finished.</li></ul>
</li>
<li>On the 22nd, Wirecard <a href="https://ir.wirecard.com/websites/wirecard/English/5110/news-detail.html?newsID=1949977&amp;fromID=5000" target="_blank" rel="noopener">said</a> the KPMG report would be released on 27 April, and that so far there were no indications of balance sheet manipulation. </li>
<li>The shares were trading at €140/share at 24 April, a few days before the KPMG report. The shares fell into that report, then fell sharply on the report and on a <a href="https://www.reuters.com/article/us-wirecard-auditor-report/wirecard-slides-again-after-short-seller-demands-ceos-head-idUSKBN22B1CB" target="_blank" rel="noopener">letter</a> from short-seller/activist hedge fund TCI which suggested the report was damning with regard to ability to confirm financials, and the company's compliance with Anti-money-laundering and KYC rules. TCI demanded the resignation of CEO Markus Braun.  The shares ended just below €100/share.</li>
<li>The April 30th release got delayed until June 4 to allow digestion of the KPMG report which was released on 28 April. That report is available for download at <a href="https://www.wirecard.com/transparency" target="_blank" rel="noopener">https://www.wirecard.com/transparency</a>.</li>
<li>Very late in the evening of 25 May, Wirecard delayed the 4 June release to 18 June, saying so far the report had no material findings, and "the company [expected] an unqualified audit opinion."<ul><li>That caused a small dip in the share price the next day, but shares finished up at €86.90 and closed yesterday - the day before prospective earnings - at €104.50. </li></ul>
</li>
</ul>This morning, the release on the Investor Relations news is considerably less sanguine.<blockquote>Wirecard AG: Date for publication of annual and consolidated financial statements 2019 delayed due to indications of presentation of spurious balance confirmations</blockquote>The shares immediately plummeted, hitting a low of €35.00 seven minutes after the news - down 66.5% from the previous close, and trading decent volume there (658k shares at that one price in one minute). Shares bounced from there, but the notes by auditor EY suggesting €1.9bn of cash balances - literally 25% of total assets, and materially all of equity - are potentially spurious suggests this is not over. As I start writing, the shares are trading at €53. There appears to be substantial short-covering. I wouldn't (subsequent to that, as I continued writing, the shares rose to €64, and fell back to €54. Now €44).I'd suggest if one wants to own the upside, one own call options, not stock. Wirecard is now <a href="https://www.t-online.de/finanzen/boerse/news/id_88077988/wirecard-aktie-stuerzt-ab-dax-konzern-sieht-sich-als-betrugsopfer-.html" target="_blank" rel="noopener">saying</a> that it sees itself as the victim of "gigantic fraud." Now that the company is admitting something is wrong with their accounts. That something wrong is 80% of their previously reported net assets. But if you are in a payments business, it is flow and the interruption to that flow which matters. Anything which smacks of illegitimacy in segregation of assets is an immediate no-no. More below the fold.

Early Thursday morning Europe time, Wirecard AG (WDI GR) announced that it would not be unveiling its 2019 audited accounts today. Results had already been delayed three times and the Annual Meeting pushed back to late August.Preliminary results released in February 2020 said Wirecard had 2019 revenue growth of 38% to €2.8bn ($3.05bn) and EBITDA of €785m.
Audited results were initially scheduled for 8 April, but that got delayed until April 30 as KPMG was completing an independent probe into allegations of accounting impropriety (the probe had originally been announced in late October 2019). Note that Wirecard had announced 12 March that the KPMG probe was largely finished.

On the 22nd, Wirecard said the KPMG report would be released on 27 April, and that so far there were no indications of balance sheet manipulation. 
The shares were trading at €140/share at 24 April, a few days before the KPMG report. The shares fell into that report, then fell sharply on the report and on a letter from short-seller/activist hedge fund TCI which suggested the report was damning with regard to ability to confirm financials, and the company's compliance with Anti-money-laundering and KYC rules. TCI demanded the resignation of CEO Markus Braun.  The shares ended just below €100/share.
The April 30th release got delayed until June 4 to allow digestion of the KPMG report which was released on 28 April. That report is available for download at https://www.wirecard.com/transparency.
Very late in the evening of 25 May, Wirecard delayed the 4 June release to 18 June, saying so far the report had no material findings, and "the company [expected] an unqualified audit opinion."That caused a small dip in the share price the next day, but shares finished up at €86.90 and closed yesterday - the day before prospective earnings - at €104.50. 

This morning, the release on the Investor Relations news is considerably less sanguine.Wirecard AG: Date for publication of annual and consolidated financial statements 2019 delayed due to indications of presentation of spurious balance confirmationsThe shares immediately plummeted, hitting a low of €35.00 seven minutes after the news - down 66.5% from the previous close, and trading decent volume there (658k shares at that one price in one minute). Shares bounced from there, but the notes by auditor EY suggesting €1.9bn of cash balances - literally 25% of total assets, and materially all of equity - are potentially spurious suggests this is not over. As I start writing, the shares are trading at €53. There appears to be substantial short-covering. I wouldn't (subsequent to that, as I continued writing, the shares rose to €64, and fell back to €54. Now €44).I'd suggest if one wants to own the upside, one own call options, not stock. Wirecard is now saying that it sees itself as the victim of "gigantic fraud." Now that the company is admitting something is wrong with their accounts. That something wrong is 80% of their previously reported net assets. But if you are in a payments business, it is flow and the interruption to that flow which matters. Anything which smacks of illegitimacy in segregation of assets is an immediate no-no. More below the fold. 

Wirecard AG

Wirecard Whoopsy - Don't Touch It