Thursday, February 25, 2016

The amazing Zatarra Research piece on Wirecard

Zatarra Research - a seemingly anonymous outfit I had never heard of - have put out an amazing report on Wirecard - a reverse merger German listed financial services company with a large market cap.

You can find the report here...

http://zatarra2016.wix.com/zatarra-research

Wirecard has long struck me as suspect - and I have maintained a short for years (yes, literally for years).

I have tried to verify the assets purchased by Wirecard that became corporate goodwill and I could not verify. Indeed I could not even confirm existence of some businesses they purchased.

Generally I follow the advice of Ronald Reagan: trust but verify.

In this case I could not verify Wirecard's assets but I have not verified Zatarra's claims...

So this post links an unverified report of a seemingly unverifiable company...

Even after the down-draft today I am showing decent losses on the position. Not all shorts work out...





John

(Hat-tip to Dan McCrum who has also been sceptical of Wirecard.)

33 comments:

  1. As the link to Zatarra's Website is already down ... is there any chance you can post the full report as pdf-file? Thanks a lot! Achim

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  2. Maybe now is the time to make the short bigger. Just saying...

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  3. Just one piece of anecdotal mosaic - both the main Wirecard website and the site of their banking subsidiary Wirecardbank were down this morning CET. (The second of these is particularly unusual given that depositors in an online-only bank might very easily have been spooked by the site being suddenly unavailable while bad news was being distributed).

    This might have been due to a DDS attack; if there was a DDS, it might or might not have been intentionally synchronised with the negative report. On the other hand, a short period of unavailability like this would also be what you'd expect to see if the company had updated its DNS nameserver, which is something you might do if, for example, there were a load of sites being hosted on it which shouldn't be (one of the Zatarra allegations).

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  4. The report is offline again - the link to the Zatarra website (which had been registered by Zatarra only a few days ago) leads only to an agency where you can register the website.

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  5. Site seems to be down.

    Alternate site:
    http://zatarra2016.wix.com/zatarra-research

    Source:
    https://twitter.com/ZRI2016/status/702536686576734208

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  6. John - the following is an alternative address
    http://zatarra2016.wix.com/zatarra-research

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  7. Ouch. While Wirecard may well be a bad company, that 'research house' is SO bogusit actually ends up provoking sympathy for Wirecard. I wouldn't want to associate with it (the report at all)

    It is hosted on a WIX domain. If you have NO internet experience, NO real internet presence, want to chuck up something in around 5 minutes - then you get a free 'WIX' domain. If you are a real company, you don't

    This research company is SO cheap, they didn't even spring for the $10 or so to remove 'WIX' from their domain. They literally have gone for the FREE option of hosting a website. If you're a real company with $10 to your name - you use your own domain. If you only have $5 to your name you borrow $5 from your mum and buy your own domain.

    Their domain is 'zatarra201'6 which suggests that either they are a venerable research house that predicted way back in 1947 that 2016 was going to 'be their year' so decided to incorporate it into their business name way back when, OR they commenced operation in 2016 and don't expect to be around in 2017. My guess is the website will be pulled in a week or so, so perhaps they should have called themselves 'zatarraFebruary2016'





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  8. The Alphaville pieces are pretty amazing too. The problem I had was that even if everything Alphaville pointed to was true, it wasn't material enough to make a difference. Wirecard was still growing like a weed and the CEO was at least regularly buying stock.
    Some poor M&A transactions aside it still had every sign of being a fintech darling.
    Also the noise about the balance sheet disconnect (why would a mere transactional business need to take working cap risk...) seemed to misunderstand their relationship with EMV. So - definitely some red flags but not quite enough to justify a short.

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  9. Amazing research piece. Only problem is that the link to current management is pretty weak and that the whole Poker/Porn business probably was very helpful in the early days of online payment services but is not really relevant anymore.

    Regarding corporate fraud in Germany:
    With VW and Wirecard to big cases in just a couple of month.
    And I bet as soon as the new MDAX addition Steinhoff Int. (South African M&A roll up with links to predatory lending (Capitec) and horse race gambling) gets into the focus of Short Sellers we might see the third case pretty soon.

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  10. ... there you go shorts; this is not exactly a "dead cat bounce"

    check the volume & remember this is just 1/2 day now ...

    http://finance.yahoo.com/q?s=WDI.DE&ql=0

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  11. This journalist from Alphaville has a grudge against WDI. Seems curious.

    Zatarra comes out of the blue : domain name created last week ; no information about the company ; outrageous accusations.
    Perfect recipe to manipulate a stock price ...

    Market authorities should investigate : who is behind Zatarra ? What are the market positions ? When were they taken ? When were they cut ?
    And ... What are the links between Alphavilles's journalist and these companies (Zatarra, Jcap, ...). Did he take positions ? Received wages for his articles ?...

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  12. Hi John,

    In last Tuesday's AFR it was implied that you supported Jon Tepper's view that housing prices in Sydney could fall up to 50% from their peak. Fair enough, if that's your view.

    However, I wanted to offer you some advice about the way that you present yourself.

    In my opinion, you could be more circumspect in your choice of language. Talking about "those people" is rather gauche and probably not helpful if you want readers to focus on your message rather than you. Also, I expect that your audience is sufficiently mature to understand that any population that one might care to define will contain a diversity of individuals, a point that was missing from the newspaper's report. I also recommend not making a statement implying that a call centre is ineffective in performing its duty solely on the basis that it is Indian.

    No hard feelings, ok?

    By the way, do you know where Rory Robertson is these days? Fancy a friendly wager?

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  13. Why did the insider buy large amounts if they are in the know?

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  14. They just bought an obscure online payment gateway in Brazil (MOIP) by roughly US$ 40 MM .

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  15. there is nothing "obscure" about it - regular business developmentrespectively M&A.
    if you have no idea what you are talking about just shut up - thanks !

    https://www.wirecard.com/newsroom/press-releases/newsdetail/wirecard-acquires-brazilian-online-payment-service-provider/

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  16. Zatarra registered a domain 2 days before the report, the 103 page report was not available a few hours latter and the website was taken down. The company is dubious, the report is dubious the people asking "can this be true" are dubious. The report does not make much sense. Visa and Mastercar would "kill" Wirecard and they are not acting.

    We will soon know who did this, just follow the money. Wirecard crashed on the stock market and someone bought the stocks at low price. There is the guilty party!

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  17. "Wirecard has long struck me as suspect - and I have maintained a short for years (yes, literally for years)."

    You have maintained a short what? I really have the feeling you have no clue of what you are talking about. Which asset did Wirecard buy which you could not confirm the existance: Moip Pagamentos SA? 3pay? Great Indian Retail Group? I don't get your text, it shows you are lazy to reasearch but still want to write about it...

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  18. well - it has long struck you as suspect ... :-)

    I hope your short position is not significantly in excess of 1 pcs of stock !

    https://de.finance.yahoo.com/echarts?s=WDI.DE#symbol=WDI.DE;range=my

    pls. amuse us with some of your profound research - thanks !

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  19. did you ever come up with a convincing explanation for why their net working capital is rising so much? I find the numbers suspicious, their explanations suspicious but I have not gained conviction that there is no legitimate explanation.

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  20. Strange Zatarra Research about Wirecard AG (WDI GR) is still online: http://zatarra-research.com/FINALMainreportZatarra.pdf

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  21. More information on the short attack
    http://www.mynewsdesk.com/dk/mila-stock-investment/blog_posts/bad-values-in-financial-times-short-attack-on-wirecard-stock-24-02-2016-43803

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  22. if you are interested in "why their net working capital is rising so much?" why don't you contact them and ask ?!

    https://www.wirecard.com/contact/investors/

    maybe some shorts did that and realized their only way to cover was to rig information on a webpage that existed roughly one week.

    if you -personally - don't have information you're not even seriously seeking for, does that make WDI a dubious stock ?!

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  23. Now to be serious, the Zatarra Site is down, because it was a fraud. Can anybody really believe, what they were sayin? Its not even a serious report and nobody has heard of them before anyways... it seems like some kind of Virus, that just spreads to fast all over the Internet, but facts never lie...
    What are the facts:
    Wirecard is still expanding, just look at their engagement in Singapoor, Poland or their Project with Curve here in the UK.
    I wouldn't panic. In fact my Wirecard will be bigger at the end of the day, because for sure, the Company will survive these cheap attacks, and the shares will rise again, at least to 60, where they've already been...

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  24. Could you comment on Alibaba's upcoming stake in Wirecard?
    http://www.bdlive.co.za/world/asia/2016/06/27/alibabas-shadow-banking-in-spotlight

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  25. Zatarra site is still up.

    http://www.zatarra-research.com/

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  26. ... so coming back to Steinhoff... took quite a while.
    http://www.manager-magazin.de/unternehmen/artikel/steinhoff-ermittlungen-gegen-markus-jooste-wegen-bilanzfaelschung-a-1164191.html

    Important part marked with !!!!
    I think this is not good for a company with 32bn in total assets vs. 18.5 bn in intangible assets.


    From google translate:
    The public prosecutor's office in Oldenburg is investigating the chairman of the furniture manufacturer Steinhoff, Markus Jooste, because of the suspicion of the balance sheet forgery. This is reported by manager magazin in its new edition, which is available from Friday, August 25th. In addition, another high-ranking group manager as well as two other men from the MDax Group, the second largest European furniture manufacturer behind Ikea and the "Poco" furniture market, were accused.

    !!!!!!!!!!!!!!!!
    The public prosecutor's office, which has been established since 2015, has the suspicion that "excessive revenues have been included in the balance sheets of group-owned companies". The background is contracts for the sale of intangible assets and / or company shares. Sellers and buyers were companies that were to come from Steinhoff. According to the public prosecutor's office, the various transactions are "three-digit millions". She rejected a comment on the names of the accused.
    !!!!!!!!!!!!!!!!


    In the case of raids in the offices of the Steinhoff-Europa headquarters in Westerstede as well as in the private homes of two Steinhoff confidants, the investigators ensured documents, which are supposed to have been signed by Andreas Seifert, co-managing director of the XXXLutz furniture chain. Seifert told the manager magazine that he had "never seen the papers before and had not signed them". He filed a criminal complaint for counterfeiting.

    The Steinhoff Group, which also includes the German Möbeldiscounter Poco, employs more than 130,000 people on five continents. In the first six months of the current financial year, the company's financial position has deteriorated. The operating profit margin fell from 11.6 to 8.8 percent. Net debt fell from 2.9 to 6.5 billion euros.

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  27. Steinhoff: And it is gone. https://player.vimeo.com/video/43762138

    Took a bit longer than expected. At least the way forward is now pretty easy to predict... Do you still have the mattress joke pic somewhere?

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  28. Takes a long time to be right sometimes

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  29. Where is that guy who used to defend WIRECARD ?

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  30. For those who cannot find the PDF of the Zaterra report, it is available here: https://web.archive.org/web/20160229095006/http://www.zatarra-research.com/FINALMainreportZatarra.pdf.

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  31. lots of parties have been complacent here - especially the German regulators, card networks, and the auditors.

    I think we (and the short sellers) should thank the Singapore regulator for their investigation and raid on Wirecard's ASEAN operations.

    The Singapore raid forced the auditors (KPMG and EY) finally to do some real auditing, i.e. checking if the $2B deposit is true.

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