* even a pretty obvious fraud can go on much longer than one would think if the organizers are ruthless enough. My original short position would have gone against me 25x over 12 years and the share price even after today’s disaster would be higher than back in 2008 (just to be clear: the company is worth ZERO in my opinion)
* a company that goes against people who write negative articles as aggressively as Wirecard has something to hide
* if the profitability of a business can not be explained by its business model, then most likely something is very wrong (greetings Bernie Madoff)
* 99% of professional investors and analysts don’t care about these things even if you tell them. A lot of people knew that the company was fishy but hey thought they can make money anyway and a lot of people made a lot of money over the years
* Small companies with far flung operations in difficult geographies should be avoided (see Globo Plc) as this makes fraud difficult to detect for auditors
* A big 4 Audit firm is no proof of quality.
"Fake it til you make it" isn't just for tech startups. A lot of companies juice results with a bit of fraud, but eventually get good real results anyway. It's hard to tell the difference between an outright fraud and a healthy company with aggressive accounting.
Just like the other MLMs (or rather pyramid schemes, because that's what they really are), they sell a (unprofitable) lifestyle using deceptive marketing. The products are secondary (they're just there to keep regulators at bay) and are always sub-par and inferior to what can be found off-the-shelf.
Furthermore, most of these luxury goods have actual value. Even if you are stupid enough to go into tons of debt and fill your garage with Harleys, there will be plenty of buyers who will be happy to take it from you at a small loss. In comparison, nobody will buy a garage full of Herbalife - the cost of shipping would be more expensive than the market value of the product itself.
It's basically just a better marketed MLM company, I first realised about the MLM part 12 or 13 years ago when I went to one of their presentations in my city (got out as soon as I could), which I guess leaves them with the "better marketing" part, which I admit they're pretty good at (if I'm not mistaken at some point they were sponsoring the football team AC Milan and the football player David Beckham).
* They tie big names into the firm to get credibility. Hire them into the board, or pay them good money for short term consulting gigs.
1) Gen. James Mattis was in Theranos board. So was Henry Kissinger and George Shultz.
2) Enron paid Paul Krugman $50,000 to attend at least two times in advisory board meetings, nothing related to Enron business. What Enron really bought was the ability to say Paul Krugman was in the advisory board. https://www.princeton.edu/~pkrugman/enron.html
> That is a pretty stunning board of directors as well. I don't doubt their CEO can get an introduction to, and lunch with, nearly anyone on the planet.
> This board seems heavily geared to do deals for defense-related applications. That's fine; getting deals with the Armed Forces and VA is feasible and quite rewarding. What they overtly lack is connections to the healthcare world. I'm surprised they aren't publicly roped into Cleveland Clinic, Mayo Clinic or Kaiser, as they to support novel technologies in this space. I suppose you can argue that the business model is fundamentally incompatible, but I've seen Mayo and Kaiser go in anyway; they can acquire these labs and roll them into operations pretty easily.
> That BOD is stunning with heavy national security/ military operations. I almost thought it was a CIA cover company.
> So, it's a health testing company that will keep all my blood-related health information and make it "actionable", with the backing of James Mattis, William Perry and none other than Henry Kissinger. There are more soldiers in that board there than doctors. The only way I'd give them my blood would be to infect them with a disease.
> Wow. She must be a pretty amazing woman to have collected such strong allies. I'd have lunch with her.
[This last one was downvoted, but is probably the sort of reaction Theranos was hoping to engineer.]
Wirecard has been accused before of fraud by so called "short sellers". The document published (2 years ago?) showed a tremendous, extraordinary complex network of international corporations. Such complex setups have a very limited purpose. It can basically be only tax "optimization", hide fraud or hide ownership (UBO). After having seen this PDF I would not touch the Wirecard stock.
By the way, I think Alibaba is opening two new corporations. Per day. You may also want to read at Bronte Capital about Alibaba.
"the company is worth ZERO in my opinion)"
This IS a possibility. But the stockmarket exaggerates always in both directions, "like a sausage dog on a leash, sometimes walks in front of you, sometimes behind you but always comes back to you" Kostalany
If you want to make a gamble there could be buying prices now or soon. But it stays a gamble.
"Even a good company can be too expensive" Buffet
"Even a shitty company can be cheap" me
I suspect that Alex in the daily telegraph will be commenting on this shortly.
> On Monday, BaFin banned further short selling of shares in Wirecard, the Dax-listed payments services group. The stock has dropped steeply after FT reports raised questions over the validity of accounts. The German financial regulator said its first ever ban on shorting a single stock was needed to prevent a loss of confidence in financial markets.
https://www.ft.com/content/f04793df-43a2-4d69-a39f-e04dac36c... has the full details (but paywall)
A company that understands it's in such a position is, IMO, more likely to misbehave because they know the odds of there being consequences are much lower.
Edit: The problem is that companies get to pick their auditors. Since the auditors sell a homogenous product (it doesnt really matter, who signs off you yearly report), the only way the big four accounting firms can compete is by being cheaper and/or more "favourable" to the customer. Both not that great for the customer (which actually should be the shareholders and in reality its mostly the board).
At the first point in time the shortselling, the FT articles and the ongoing BAFIN investigation were known. At the second point in time it was known, that they hired there buddies from KPMG, who could not find anything wrong, but even they were critizising the quality of their report, EY could not find the missing money and the public prosecutor in Munich started a criminal investigation.
They still invested. One of them is a computer scientist and CEO of a small business, the other one has a PHD in business administration and works at a big three consulting firm.
Even highly educated people seem think of investments inherently as pyramid schemes. "It fell, so it has to go up again next!" "It cannot rise further, it's already at its all-time-high." No consideration for the actual value being created. At some level, you cannot blame them, TINA and monetary policy actually make it true. Auditing and rating companies, who are supposed to help here are a joke, making it all seem like a game.
It digusts me. On one end of the spectrum, money is something real and valuable. It decides, for how long you have to work, whether you have to live in your car or what you can afford to eat that day. On the other end, it's a a surreal thing. The direction it goes is controlled by private (!) instutions with enourmous amounts of power.
I hope that more people, who did not need the money lost it, than those who needed it. I also hope, that not only Wirecard staff will get prosecuted, but auditors have to pay for this in some way.
Why do we allow auditors to be private institutions with a profit motive, who are also doing business consulting on top of it?
I think the markets have been completely messed up by stimulus since 2008, and it's only getting worse. Governments are buying company bonds for gods sake. Stocks aren't about market pricing any more. They are some vanity metric that governments are obsessed about now to keep from falling (just like house prices).
The sad thing is that this erroneous monetary policy will only stop if politicians and central bankers are willing to stomach a harsh market recalibration, but seeing as they seem to not be willing to do that judging from their recent actions so I fear that this systemic malinvestment and inequality will just get worse and worse until something breaks.
Maybe, but OTOH the stock market returns are actually no different from pre 2008 (S&P500 in this case): https://www.macrotrends.net/2526/sp-500-historical-annual-re...
There's been real disruption since 2008. Stock market returns don't show it, and they should. The efficient allocation of society's capital depends on honesty and fairness here, and instead this gap is papered over by government intervention, meant first and foremost to prop up politicians' careers, in an unsustainable sham. It will go better for society if we are honest about it than if we wait for everything to collapse when we are truly put to a test and find there is nothing to our prosperity but a mirage.
And as you, Qasaur, say: “this erroneous monetary policy will only stop if politicians and central bankers are willing to stomach a harsh market recalibration, but seeing as they seem to not be willing to do that judging from their recent actions so I fear that this systemic malinvestment and inequality will just get worse and worse until something breaks.”
I think society has reached that breaking point and starting to show the cracks. Digging underneath the protests/riots/violence/standoffs in cities like Minneapolis or Seattle, as they have revealed, what you'll find is rooted in socioeconomics.
Frankly, not unreasonable either. The entire travel industry was destroyed overnight, so it's entirely possible they could emerge from insolvency with an infusion of capital and be just fine. I'm not putting my money on it, but it's not the most outlandish thing I've heard either.
And while Manfred Schmider went to jail for a couple of years he apparently still managed to move a lot of his assets overseas and comfortably lives on Mallorca today. I'd not be surprised if Wirecard turns out to be a similar case, it's just hard to imagine that they really got defrauded by their banking partners and that a company of this size would simply entrust 1.9 BN € to some random lawyer based on the Philippines, this is almost certainly a cover-up story.
This stuff makes my blood boil. I continue to be astounded that this seems to be the default.
This is one of the reasons why I feel that over time I got very much supportive to "eating the rich", their power to skirt the law is way overdue to be corrected.
I am feeling the same way. Also for me it is not about them being rich or powerful, but more about general lack of accountability throughout the whole system.
Thats an unfortunate side-effect of a weak justice system. I believe the "eating the rich" attitude is very unhelpful. We need entrepreneurs, we need startups. If rich people are the problem, that would mean that every time a new business is founded, the world becomes a little worse. This is obviously not the case.
So, will anything happen to E&Y, or do they just get to say "we didn't know that was fraudulent, we just did what we got paid to do"?
Both. German financial regulation is kept intentionally incompetent to not annoy the bosses and their politician friends. It is corruption hidden and performed by incompetence imho.
Found a report that covers this: https://www.asianage.com/metros/delhi/180319/acquisition-of-...
And another from the date of the acquisition: https://www.medianama.com/2015/10/223-wirecard-great-indian-...
The literal meaning (to use similar English words) would be "Shag shack", aka "brothel"...