Wirecard: Greed Was Never The Problem, Naivety Was

Jun. 27, 2020 5:56 AM ETWirecard AG (WCAGY), WRCDF41 Comments
The European View profile picture
The European View
12.97K Followers

Summary

  • With the filing for insolvency, Wirecard has now entered a new, sad chapter.
  • In my view, investors can write off their investment. Even if the company continues its (possibly non-existent) business, there is unlikely to be much of a return for investors.
  • In the end, a risk of general life materialized here. Fraud is possible despite all security mechanisms and investors bear the risk here like any victim of crime.
  • In the end, everything can be gone. But those who diversify widely can still benefit from the stock market and should not let themselves be discouraged.

Introduction

It will probably not be the last chapter in this sad and inglorious history of Wirecard (OTCPK:WCAGY, OTCPK:WRCDF). At the moment, I am writing this article, Wirecard has filed for insolvency. Just to anticipate one thing, I also hold shares in the company, as I have documented transparently here at Seeking Alpha. Hence, I think that it is time for an obituary and time for investors to reflect.

What's left for investors now?

I share not only my successes but also my failures. And so far, Wirecard was the biggest mistake of my "career" as a private investor.

(Source: My worst bullish rating ever)

With such price losses, I can book a complete loss of my investment here. The insolvency doesn't change much in this respect. I do not expect the company to survive this. While I have never had problems understanding the business model of Wirecard, we have to assume that the business model, as promising as it sounds, did not exist to the extent documented by the company.

Although in the current insolvency proceedings, the business (as far as it exists) will be continued, this will hardly help the company and its investors. Most customers (if they exist) will terminate their contracts with Wirecard and switch to other providers such as Adyen (OTCPK:ADYYF) (OTCPK:ADYEY) (AMS: ADYEN).

Since Wirecard only charged low fees of approx. 1 to 1.7 percent per transaction, the company needs a high transaction volume to operate profitably. Even if we look at the withdrawn balance sheets, the gross margin was always meager.

(Source: Wirecard always had a low gross margin)

Visa (V) and Mastercard (MA) would not even have to cut their ties with Wirecard, because apparently Wirecard was never really profitable. Even with Visa and Wirecard, the loss of reputation as

ChartData by YCharts

This article was written by

The European View profile picture
12.97K Followers
Runner of the TEV Blog | Lawyer For Competition Law And Antitrust | Private InvestorI am a long-term oriented investor and in my early thirties. I hold a law degree and a doctor in law and love investing and talking about my and others' investments. I regularly write about my research and investments on various investor platforms and on the TEV Blog. Living and working in Europe in an international law firm as a lawyer for antitrust & competition, I may have another view on American companies, especially when it comes to the reputation of a company or possible alternatives here in Europe. Hence, I try to build a diversified portfolio not only with American blue chips but also with smaller and maybe hidden European Champions. Given that, I am very sensitive and close to the political and economic fundamental environment in Europe. My readers benefit from this. When it was foreseeable that Qualcomm would be fined by the European Commission, I calculated the exact amount in advance and was able to inform my readers about it. The same applies to the European Commission's first interim measures against Broadcom, which were the first in two decades. Furthermore, I was the first analyst (to my best knowledge), who predicted without any doubts a dividend cut by Deutsche Telekom. **My articles represent my opinion only and in no way constitute professional investment advice. It is the responsibility of the reader to conduct their due diligence and seek investment advice from a licensed professional before making any investment decisions.**

Disclosure: I am/we are long WRCDF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (41)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.