Tuesday, 6 December 2016

Wirecard (WDI GR) ... 'Skin in the Game'?

Tuesday 6th December 2016

No sooner had I finished writing the post below, than I was alerted to yet another range of alarming concerns being raised regarding Wirecard (WDI GR). Whereas originally, there was the:

FT (here, here, here, here, here, herehere, here, here, and here),
J Capital Research,
then Zatarra Research & Investigations

THIS time, an unnamed author has meticulously pieced together a whole range of information. It is fascinating stuff.

This follows on from the engrossing article published a few weeks back in Reuters:
How a British town became a hub for online porn and poker

As for me, I have written on Wirecard before (see here), focusing on its acquisition of the Indian, GI Retail business.

This post will likely be another of a series of further posts looking at Wirecard.

In the spirit of openness, I am short Wirecard. Wirecard is my biggest short position since Globo (GBO LN). In fact, my confidence has persuaded me to make it my biggest short ever. Time will tell if this is mere swagger. However, my money is where my mouth is which is not altogether clear for others, and so on that subject I present these observations below ...

Director Purchases

I've written on Director purchases before: see here - Director purchases and sometimes lazy longs.

By and large, investors like management with stakes in the companies they run. The thinking goes, that with 'skin in the game', any weakness in the share price is felt not just by the investors but also by management. Hence, interests are closer aligned, and there's few better signals to get an investor's fists pumping than seeing a Director dip his/her hand in their pocket to hoover up some stock. 

Usually this simple reasoning is valid. Usually. 

Aside from the example of Connaught in the link above, more recent examples of where this reasoning has gone wrong include:
  • Rob Terry, the former Chairman of Quindell (now Watchstone Group Plc WTG LN) and his use of the services of Equities First Holdings (EFH); and 
  • Konstantinos Papadimitrako, the former CEO to the fraud, Globo Plc (see concerns raised here). 
In Rob Terry's case, he initially led market participants to believe that he'd pledged some of his Quindell stock as collateral to an outfit called Equities First Holdings (EFH) in exchange for cash that he then intended to use to buy further Quindell shares. Most of Quindell's shareholders rejoiced at this gearing up. However, in the event, while Mr Terry bought a few shares, he bought nowhere near as much in value as the cash amount he received when pledging his stock for the loan. Mr Terry then withdrew from any further dealings with EFH, kept the majority of the cash from the pledging of his stock, and as soon as he stepped down from Quindell's board, he sold a load more stock into the market. 

In the example of Papadimitrako, he merely dumped as much of his c. 18% stake in Globo as was possible in the months leading up to Globo's bankruptcy. This selling was concealed from Globo's hapless shareholders as Papadimitrako simply didn't report his selling until the days after he came clean on the falsification of Globo's financials. All told, Papadimitrako probably pocketed at least £12 Million through selling stock and not declaring it until it was too late. 

There are other examples, but in each case of the three given above, Connaught, Quindell, and Globo, despite flags being raised well in advance of each company's downfall, longs were seemingly always comforted by the management's 'skin in the game'.

Purchases by Wirecard's Management

According to Bloomberg, through his German company, MB Beteiligungsgesellschaft mbH (MB B), Markus Braun, Wirecard's CEO, is Wirecard's third largest shareholder. Bloomberg shows that MB B holds 7% of Wirecard's stock at the latest count, not far behind the institutions, Jupiter Investment Management and Alken Asset Management; the No. 1 and No. 2 shareholders respectively. The other major holdings can be seen in the table below: 

Major holdings in Wirecard AG
Source: Bloomberg
Bloomberg also has a feature which shows the timing of Markus Braun's sales and purchases through his German company, MB B. The data goes back to at least mid 2008. Red is sales, green represents purchases. This can be seen in graphical form below:

Sales and purchases by MB Beteiligungsgesellschaft mbH (MB B - Markus Braun's German company)
Source: Bloomberg
The timing, volume and closing price on the date of transaction of those MB B sales and purchases is shown by Bloomberg in tabular form below:

Sales and purchases by MB Beteiligungsgesellschaft mbH (MB B - Markus Braun's German company)
Source: Bloomberg
This information makes for some interesting number crunching. Word of warning, I'm assuming Bloomberg data is an accurate source and also that I've not made any inadvertent errors in my maths, so please do double check with your own Panasonic scientific calculators. 

Ok. Here goes ...

The Number Crunching

On my maths using Bloomberg's data, since July 2008, Markus Braun has purchased 1,365,000 shares in Wirecard through his German company, MB B. 

Again on my maths using Bloomberg's data, since July 2008, Markus Braun has sold 1,414,050 shares in Wirecard through his German company MB B. 

However, with the exception of the 50,000 shares and a further 150,000 shares, which MB B acquired in 2008, the remaining 1,165,000 were purchased after MB B sold 1,414,050 shares in 2012.

At the closing prices listed by Bloomberg in the table above (which does not necessarily mean the actual prices realized but might be a ball park figure):
  • The purchases in 2008 would have cost MB B, c. €1 Million. This is by no means small change. 
  • The subsequent sales in 2012 would have brought to MB B, proceeds of c. €24.2 Million. A material win. 
  • The subsequent purchases from 2015 onward, would have cost MB B, c. €45.4 Million. A significant outlay. 
Now, of course there is some rounding error here and there is no guarantee that sales and purchase proceeds and costs would be made exactly at the closing prices listed above. But ball park figure wise, it would seem possible that MB B has hauled in c. €24.2 Million in share sale proceeds and spent c. €46.4 Million in purchasing shares in Wirecard. A net expenditure of c. €22.1 Million on Wirecard stock by MB B since 2008. Wirecard's shareholders must surely be pumping their fists at the results of that number crunching. 

So what is the source of that net c. €22.1 Million spent on Wirecard shares?

Perhaps Markus Braun is very well paid? 

According to Wirecard's 2015 annual report, Markus Braun received total remuneration payments (including benefits) of c. €2.4 Million (2014: c. €1.8 Million). 

According to Bloomberg's data and on the same basis as used above, MB B spent c. €26.6 Million on Wirecard share purchases in 2016, and c. €18.8 Million on Wirecard share purchases in 2015. 

So even though MB B hauled in c. €24.2 Million in proceeds from share sales in 2012, it would appear that MB B's net purchases of c. €22.1 Million dwarfs Markus Braun's annual pay. 

Perhaps there's another source?

It would seem that the annual balance sheets for Markus Braun's German company, MB Beteiligungsgesellschaft mbH (MB B) are filed at the German Company Register: www.bundesanzeiger.de

Unfortunately, the most recently available balance sheet for MB B is as of 31 December 2014. Nonetheless, this bears what some may find to be interesting information. Here is that balance sheet in German - and then a google translation (which I have assumed is accurate) into English - below:

Balance sheet of MB Beteiligungsgesellschaft mbH to 31 December 2014
Source: www.bundesanzeiger.de

Balance sheet of MB Beteiligungsgesellschaft mbH to 31 December 2014 - Google translation into English
Source: www.bundesanzeiger.de
According to the MB B filings, as of 31 December 2014, the company held:

  • c. €31.9 Million in financial assets, up from c. €7.0 Million in 2013. It may be worth noting that after the sale of 1,414,050 shares in 2012, that according to data on Bloomberg, the first of MB B's share re-purchases didn't occur until May 2015. This entry may possibly represent MB B's other holdings of Wirecard stock at the time, although one would have thought the market value to be higher than c. €31.9 Million.  
  • c. €28.9 Million in receivables and other assets, up from c. €22.7 Million in 2013. 
  • c. €0.7 Million in cash and cash equivalents, down from c. €7.3 Million in 2013. 
  • c. €25.1 Million in liabilities, up from c. €31 Thousand in 2013. 

Further down the balance sheet of MB B, there are some notes corresponding to the balance sheet items. Here are the notes in German - and then a Google translation into English (which I have assumed is accurate) - below:

Notes to the balance sheet of MB Beteiligungsgesellschaft mbH to 31 December 2014
Source: www.bundesanzeiger.de
Notes to the balance sheet of MB Beteiligungsgesellschaft mbH to 31 December 2014 - Google translation into English
Source: www.bundesanzeiger.de
As shown above, these notes appear to show that as of 31 December 2014, MB B held receivables due from its shareholders, which presumably is Markus Braun, of c. €28.4 Million.

The notes also appear to re-highlight that MB B had c. €25.1 Million in liabilities.

Unfortunately there is no further information on the balance sheet items so it is not possible to conclude:
  1. Why Markus Braun appeared to owe MB B c. €28.4 Million in 2014, nor what it related to?
  2. If the c. €25.1 Million was a debt item, and if so, WHO had MB B borrowed the c. €25.1 Million from and was any security provided had it been a debt?
Although there is scant detail, one explanation - from the notes to the balance sheet - may be that MB B borrowed c. €25.1 Million from an unknown party and has sent some or all of the monies and more to Markus Braun. There are of course alternative explanations as to the funding of Markus Braun's share purchases. For example, he may simply be incredibly rich or there may be tax advantages to this arrangement. But whether this answers why Markus Braun possibly owes MB B the monies he did in 2014 and who MB B possibly borrowed from in 2014 is unclear.

And another thing
As far as I can tell, Markus Braun is not a member of the Board of Management or Supervisory Board of Wirecard Bank. In light of the above, I found that interesting.  

Wirecard Bank - Board of Management and Supervisory Board
Source: www.bundesanzeiger.de
Wirecard Bank - Board of Management and Supervisory Board - Google translation into English
Source: www.bundesanzeiger.de
I am short Wirecard.

Disclaimer: The information, discussions or topics referred to on this blog should in no way be considered “advice” to buy or sell anything. The information which may be referred to is freely available in the public domain and where required the source of information is referenced to for verification. While every effort has been made to ensure the veracity of any information contained within this blog, the author accepts no responsibility for the accuracy of any information contained within this blog or for the sources of information which may be referred to. Readers are responsible for their own actions and interpretation of the information contained within this blog. 


  1. Any thoughts on wirecard a year on? Its momentum is relentless.

  2. eToro is the ultimate forex broker for novice and established traders.

  3. Your website is really cool and this is a great inspiring article. agen judi online

  4. It was contemplating whether I could use this audit on my other site, I will associate it back to your site though.Great Thanks. 파워볼엔트리

  5. People appreciate shopping for astounding, engaging, captivating and every once in a while alluring fragrances for them selves and relating to other people. This can be executed helpfully alongside modestly in an on-line aroma shop. 토토사이트

  6. For many people this is important, so check out my profile: software retail

  7. This article gives the light in which we can observe the reality. This is very nice one and gives indepth information. Thanks for this nice article. playboy888 download

  8. I might want to thank you for the endeavors you have made in composing this article. I am trusting the same best work from you later on too..  해외배팅사이트

  9. bookmarking and checking back frequently!it people processing it really is another person's renowned company, you will never in the world of the 55 and other lavishness brands supra to uncover which.. 안전토토

  10. I am extremely delighted in for this web journal. Its a useful subject. It help me all that much to take care of a few issues. Its chance are so awesome and working style so rapid. 영앤리치 먹튀

  11. This article is an appealing wealth of useful informative that is interesting and well-written. I commend your hard work on this and thank you for this information. I know it very well that if anyone visits your blog, then he/she will surely revisit it again. rajaqq

  12. Sleek skins need a without oil, lightweight lotion, while develop skin that will in general be on the dry side can profit by a rich cream, especially around evening time. Evade creams with counterfeit scents or colorants.
    Beauty shop !

  13. All the contents you mentioned in post is too good and can be very useful. I will keep it in mind, thanks for sharing the information keep updating, looking forward for more posts.Thanks Investments in Stock Exchange

  14. This post is very simple to read and appreciate without leaving any details out. Great work! We Have the Perfect Financial Plan For You! wealth

  15. You won't figure out any variation of online poker in the first couple of rounds. Nearly all online poker games are steeped in strategy, mathematical odds, probabilities and just plain old luck, so there's almost always something new to learn from each round of poker online. pkv games

  16. Discover deals on your favorite beauty brands today! Luxury Beauty, Hair Care, Skin Care & Make Up at GlomBeauty.com. Free Delivery To Dubai, Abu Dhabi ... kakadu c high potency evening oil

  17. advantages of Buying a Used Car. If you are wondering why people tend to buy a used car, let us inform you that there are many advantages and disadvantages associated with buying a used car.used cars near me

  18. Are you searching for the best online gaming experience? You can choose the 918kiss malaysia online casino game. It is one of the most popular and highly entertaining online casino applications available today in Malaysia. Primarily available on mobile platforms, it has managed to win the hearts of a large number of people in Malaysia

  19. This is such a great resource that you are providing and you give it away for free. I love seeing blog that understand the value. Im glad to have found this post as its such an interesting one! I am always on the lookout for quality posts and articles so i suppose im lucky to have found this! I hope you will be adding more in the future...
    idn poker online

  20. what cybersecurity means, and the different types of cyberattacks with a hands-on demo for each. This video also covers the concept of ethical hacking; here, you'll gain an insight into an ethical hacker's life. In addition to this, cybersecurity training london, we will also guide you with the various cybersecurity jobs available today and the different types of cybersecurity certifications you can pursue to flourish in this field. Here, we will also be speaking of the CISSP certification in-depth, and finally, we will conclude this video with the top cybersecurity threats faced in today's times.

  21. Mmm.. good to be here in your article or post, whatever, I think I should also work hard for my own website like I see some good and updated working in your site. SKIN CARE

  22. This is just the information I am finding everywhere. Thanks for your blog, I just subscribe your blog. This is a nice blog..

  23. Nice post. I was checking constantly this blog and I am impressed! Extremely helpful information specially the last part I care for such info a lot. I was seeking this particular information for a very long time. Thank you and good luck.

  24. I finally found great post here.I will get back here. I just added your blog to my bookmark sites. thanks.Quality posts is the crucial to invite the visitors to visit the web page, that's what this web page is providing. B2B Guru Class

  25. An arrangement of profoundly fluid stocks, for example, those recorded on the S&P 500, will consider a higher advance to-esteem rate, than an arrangement of meagerly exchanged penny stocks.London Business Stock Loans

  26. It will help tighten your skin and remove any dirt or makeup that you could have missed during washing. http://skincaresoft.com/

  27. Thanks for your insight for your fantastic posting. I’m glad I have taken the time to see this. Hack and cheat forum

  28. A very awesome blog post. We are really grateful for your blog post. You will find a lot of approaches after visiting your post. King Trading Systems - Option Alpha Reviews

  29. Thank you for oder my Gigs. Please share the details guide in the project.

    shaw internet plans

  30. This is really very nice post you shared, i like the post, thanks for sharing.. rust skins

  31. If you search the internet, you will find a lot of SMM panels. Many of these offer reasonably priced services. Since there are a lot of competitors, you can get your desired panel at a reasonable price weblink


  32. The sun is answerable for a reiteration of skin issues, and all the more significantly skin malignancy. Logical investigations have shown that rehashed bright openness separates collagen, debilitates the skin's capacity to fix itself, and assaults our elastin.All natural ingredients

  33. A debt of gratitude is in order for sharing the information, keep doing awesome... I truly delighted in investigating your site. great asset... 網上交友平台

  34. A regular meeting endures no longer than 20 minutes. On the off chance that it is controlled for more than that, the muscles can be extended in lieu of fixed. Bothering can happen in individuals with touchy skin, so your back rub specialist will cautiously investigate your face before starting your facial back rub to choose the appropriate pressing factor and strategy to utilize. Gua sha Stone

  35. Waxing is an agonizing work with regards to hair expulsion, yet it additionally is probably the most ideal ways since it takes all the dead skin layers off your skin with the hair, and makes it look new. Hair expulsion from waxing is a vexing method, which incorporates a great deal of time, torment, and exertion for the system. Laser Hair Removal in Manhattan

  36. Laser treatment for skin break-out scars isn't regularly secured by protections. Agreeing to the American Society of Plastic Specialists, the normal out-of-pocket cost for laser skin reemerging is around $2,000 for ablative and $1,100 for non-ablative laser medicines. acne scar removal cost