FT : La Scala’s season opens with a powerful Tosca

La Scala’s season opens with a powerful Tosca
Anna Netrebko shines in the title role while Riccardo Chailly conducts a fine reading of the score

At the theatre, VIPs floated past jostling paparazzi, riot police outside observed polite civil rights protesters and Italy’s president, Sergio Mattarella, was showered with rapturous applause. Across the country, record numbers of television viewers tuned in to the nation’s most important cultural event. The opening night of La Scala’s season is, after all, Italy’s biggest celebration of an operatic tradition that is seared into the collective DNA. And after two relatively obscure titles in consecutive years, Puccini’s popular Tosca generated especially broad-based excitement.

Sitting in his customary box, superintendent Alexander Pereira, whose contract was not renewed following a recent funding scandal involving the Saudi government, surveyed the extravaganza for his last time in charge. La Scala has refocused on Italian repertoire under his watch, and music director Riccardo Chailly’s revisionist Puccini project has been a flagship. Tosca had been pruned by the time it first arrived at La Scala in 1900; the new critical edition heard here has restored the original Rome version.

In a production clearly intended mainly for live cinema audiences, mammoth sets — a sumptuous baroque church, an atmospheric palazzo and a broodingly lit castle — host inventive responses to challenges posed by the new edition (Tosca is suspended during the extended finale passage, as if seen falling from above). But director Davide Livermore’s acknowledgment of the score’s proto-cinematic qualities has mostly inspired clumsy attempts to recreate camera zooms and panning shots onstage.

Chailly, whose selection of the original score underlines his commitment to reappraisal, ensured that this was a performance to be enjoyed with ears rather than eyes. By favouring spacious tempi, transparent textures and razor-sharp detail, the conductor shines a torch through the score, illuminating the full complexity of its hyper-veristic objectivity. If Chailly has occasionally stumbled since arriving at La Scala, perhaps this very fine reading will win over detractors.

A fittingly starry cast was assembled for the big night. Soprano Anna Netrebko (Tosca) offered a more contained, yet deeply psychological, interpretation than might have been expected from this super-diva. Sparks flew between her and baritone Luca Salsi (Scarpia), who worked menacingly seductive vitality into each syllable. The ardent Francesco Meli (Cavaradossi) sounded glorious and acted persuasively. Carlo Bosi sparkled in the secondary role of Spoletta. As Italy’s political and economic crises persist, at least its warhorse cultural institution is firing on all cylinders.

FT : Sanofi buys cancer-focused biotech and targets key growth areas

Sanofi buys cancer-focused biotech and targets key growth areas
Drugs group unveils tighter strategic vision as Merck also acquires oncology biotech

Sanofi, the French drugmaker, is to intensify its focus on key growth areas such as oncology, rare diseases and immunology while ending research into diabetes and heart disease, as it tries to combat falling revenues in its one-time core franchises.

Unveiling the strategic shift, Paul Hudson, chief executive, targeted €2bn in efficiency savings by 2022 and announced that its consumer healthcare division would become a standalone business as he gave the first insight into his priorities since taking the helm in September.

The company had earlier signalled its ambition in oncology when it announced it was buying Californian biotech Synthorx for $2.5bn. Separately, US-headquartered Merck said it would acquire another cancer-focused biotech, ArQule, for about $2.7bn as it attempts to build on its recent success in oncology.

Mr Hudson said Sanofi would “anchor our efforts in leading-edge science, with clearer priorities and a focus on delivering results”.

As well as stopping research into diabetes and cardiovascular disease, it said it would not pursue plans to launch efpeglenatide, a long-acting diabetes medicine currently under development.

Sanofi has been seeking to strengthen its portfolio following the loss of patent protection on key diabetes treatments and political pressure in the US over the cost of insulin. However, in a call with reporters, Mr Hudson said the decision to pull out of diabetes research, even when a trial was under way, was not due to “short-term pricing pressures”.

Describing it as a “trade-off”, he added: “It was a recognition that to compete in diabetes, with similar mechanisms, in a similar patient population, would require a significant, disproportionate investment that we believe should be made elsewhere in the portfolio”.

Mr Hudson also announced a simplification of Sanofi’s structure, with four core global business units to be reduced to three: speciality care covering immunology, rare diseases, rare blood disorders, neurology and oncology; vaccines; and general medicines, taking in diabetes, cardiovascular, and established products.

Sanofi had been grappling with a dilemma already confronted by a number of other big pharma companies in deciding whether to remain a diversified company or to sell, or spin off, its consumer health division.

On Monday Mr Hudson announced that consumer healthcare would become a standalone business unit with integrated R&D and manufacturing functions. The objective was “to unlock value and entrepreneurial energy by growing faster than the market over midterm”, he said.

Among key growth drivers he identified for the company were Sanofi’s vaccines business and its anti-inflammatory medicine Dupixent, for which the company on Monday set the ambition of achieving more than €10bn in peak sales.

The medicine was already on course for “mega blockbuster” status, Mr Hudson said, but had hardly penetrated the potential patient populations, with just 3.5 per cent of sufferers of atopic dermatitis and even fewer asthmatics taking the drug.

Overall, the company expected to expand its business operating income margin to 30 per cent by 2022, with an ambition for it to exceed 32 per cent by 2025.

The Synthorx deal could be a model for future acquisitions, Mr Hudson argued, as he looked for “first and best in class” drug candidates that would fit well with the existing portfolio and could even be used in combination. “We are open minded and interested and we’ll see how the science evolves,” he said.

Sanofi will acquire all of the Californian biotech’s outstanding shares for $68 a share in cash, representing an aggregate equity value of approximately $2.5bn on a fully diluted basis. The acquisition price represents a 172 per cent premium to Synthorx’s closing price on Friday.

Meanwhile Merck is buying ArQule because of its advances in precision medicine for cancer, which includes a leukaemia drug in the early stages of clinical development. The acquisition comes after Merck’s success with Keytruda, a blockbuster drug that harnesses the immune system to fight cancer. The cash deal of $20 a share is a 107 per cent premium to ArQule’s closing price on Friday.

WSJ : Big Drugmakers Push Deeper Into Cancer Treatment

Big Drugmakers Push Deeper Into Cancer Treatment
Merck to buy ArQule for $2.7 billion, while Sanofi moves to purchase Synthorx for $2.5 billion

Two of the world’s biggest drugmakers struck multibillion-dollar deals on Monday aimed at bolstering their lineups in the fiercely competitive cancer-drugs market.

Merck & Co. said it would acquire ArQule Inc. for about $2.7 billion, paying a 107% premium in a bid to diversify its cancer treatments beyond top-selling drug Keytruda. Meanwhile, Sanofi SA SNY -1.59% said it would spend $2.5 billion, a 172% premium, to acquire Synthorx Inc. THOR 170.52% in the French drugmaker’s own effort to catch up with rivals in the field of oncology.

Both deals reflect the industry’s intense pursuit of new products to sell in one of the world’s biggest and fastest-growing prescription-drug segments. The $123 billion world-wide cancer-drugs market is expected to almost double by 2024, according to market-research firm EvaluatePharma.

Bristol-Myers Squibb Co. BMY 2.22% recently closed on its $74 billion acquisition of rival Celgene Corp. to create a cancer-drugs powerhouse. Pfizer Inc., PFE 0.08% which has positioned itself as a company focused on cancer, bought Array BioPharma for $10.6 billion this summer. And Eli Lilly & Co. acquired Loxo Oncology for about $8 billion earlier this year.

The promise of new sales in a lucrative market appeals to pharmaceutical companies, which are counting on cancer treatments to provide new revenues as older products lose patent protection.

Making the segment even more attractive is the U.S. Food and Drug Administration’s willingness to approve new cancer drugs with smaller, faster and less-expensive clinical trials. And companies have found that health plans will pay for cancer drugs, even at prices that often top $100,000 for a year’s treatment.

Scientific breakthroughs, including the ability to target specific mutations and combine medicines, are also helping drive the industry’s interest, said Roy Baynes, Merck’s senior vice president of global clinical development and chief medical officer.

“The science is evolving very rapidly,” Dr. Baynes said in an interview. “The good news is that we are now focused on drugs which really do have big effect.”

But the interest in finding the next big new product has driven up the prices that big drugmakers have had to pay. Companies have paid mean premiums of 114% this year for small- to midsize deals such as Sanofi’s and Merck’s, up from 67% during the previous five years, according to analysts at Evercore ISI. The data are for drugs of all stripes, not just cancer treatments.

And the commercial market for cancer treatments has become hard-fought, forcing companies to race to be the first or second to market to secure a position before rivals.

Merck agreed to pay $20 a share in cash for ArQule, of Burlington, Mass. The deal is expected to close early in the first quarter of 2020.

It would increase Merck’s offerings of therapies that treat blood-related cancers. ArQule’s lead experimental treatment, called ARQ 531, is being tested in patients with blood cancers who carry a specific genetic mutation that prevented them from responding to previous treatments.

“It’s early, but it looks like it has a lot of potential,” Dr. Baynes said of the therapy.

Dr. Baynes acknowledged that other companies are developing therapies similar to ArQule’s, but such contests drive innovation.

Merck has been looking for deals to expand its portfolio of cancer treatments beyond Keytruda, as some investors and analysts have worried that Merck has become too dependent on the product. Keytruda’s global sales totaled nearly $7.2 billion last year.

Earlier this year, Merck, of Kenilworth, N.J., bought Tilos Therapeutics Inc. and Peloton Therapeutics Inc., both of which are developing cancer therapies.

Citigroup analysts said Merck’s expansion in hematology makes sense because it hasn’t been very active in that field, and expects the deal “to be the beginning rather than the end of similar moves.”

Many of the therapies that big drugmakers are acquiring are immunotherapies such as Keytruda or complement the drugs, a relatively new class of treatment that unleashes a patient’s own immune system in the fight against cancer.

For Sanofi, acquiring Synthorx, of La Jolla, Calif., is an attempt by the French pharmaceutical company to erase the gap with rivals that already sell the drugs. Synthorx’s lead agent is in the early phase of patient testing in a range of cancers, both on its own and in combination with existing cancer immunotherapies.

The deal is the first big move by Sanofi Chief Executive Paul Hudson, who began leading the company in September, and suggests that cancer treatment will be one of the company’s new priorities.

Sanofi said it would pay $68 a share in cash for Synthorx.

“This acquisition fits perfectly with our strategy to build a portfolio of high-quality assets and to lead with innovation,” Mr. Hudson said.

Sanofi is one of the most diversified companies in the industry, spanning branded prescription drugs, vaccines and over-the-counter treatments. Within branded drugs, it produces medicines ranging from insulin for diabetes to specialty medicines for rare diseases.

FT : Prosus’s £5bn bid for Just Eat shows the price of competition

Prosus’s £5bn bid for Just Eat shows the price of competition
New offer described as ‘derisory’ by rival, but it prices in the presence of Uber

Can a couple of hastily served ketchup-free burgers really be worth £10? Shouldn’t it be more like a fiver? That was the question being muttered by Lombard outside Santa’s grotto at the local community centre on Friday night. And it was pretty much the same question faced by Just Eat shareholders on Monday morning.

Prosus’s increased cash offer for the UK food-ordering business of £7.40 a share — about £5bn — had been described as “derisory” by rival all-share bidder Takeaway.com. Cat Rock Capital, an investor in both food groups, was more specific, suggesting that Just Eat was worth “at least 5 times 2020 consensus revenue”, or £9.25 a share.

However, people familiar with Prosus point out that Just Eat shares were worth only £5.89 on the day before Prosus made its first bid and that even that level had been inflated by Takeaway.com’s earlier offer. Following this logic, Prosus’s latest bid actually represented a standard 30-40 per cent takeover premium to Just Eat’s true, undisturbed share price. Of nearer £5.

How can valuations in an established sector vary so widely? Much as Santa’s spatula-wielding helpers worked out, it all depends on the competition. Up against a bowl of stale crisps from the local estate agent, the elves’ market price for two burgers became a tenner.

Similarly, with relatively limited food delivery competition in Germany and the Netherlands, Takeaway.com’s market price has averaged 8.3 times its revenue since 2016. Applying that multiple to Just Eat’s revenue, which Takeaway.com did on Monday, suggests the UK group could be worth £11 a share. Or £12 a share, if you use Cat Rock’s cash flow multiples.

But is competition in the UK sufficiently non-existent to justify this? No, say Prosus’s advisers — who make a big distinction between “3P” and “1P” markets. This is not a reference to penny pinching over ketchup sachets. Rather, it is shorthand for “third-party” delivery markets — where an app or website takes the order but the restaurant delivers — and “first-party” delivery, where one company handles everything.

In Europe’s early 3P markets, Takeaway.com was able to command a valuation multiple of 8.3 times revenue. In the US, though, fierce competition from 1P players such as Uber has cut Grubhub’s multiple to just 2.6 times estimated 2020 revenue, and 2.3 times 2021 revenue. Even in Europe, as more markets move to a 1P model, Delivery Hero’s multiple falls from 4.6 times 2020 revenue to 3.2 times 2021’s revenue.

That makes Prosus’s £7.40 in cash for Just Eat — 4 times 2020 revenue — look more reasonable. It also makes Takeaway.com’s all-share offer look like one based on a toppy and outdated valuation. Just Eat and Takeaway.com have had market-leading positions for years. But, unlike the burger stand at Santa’s grotto, they’ll be up against tougher customers from now on.

All go at Amigo
Amigo is “exactly where we want [it] to be”, said chief executive Hamish Paton 10 days ago, writes Kate Burgess. Amigo is not where its founder wants it to be, though. Shares in the lender are down three quarters in a year. Now, James Benamor, owner of 61 per cent of them, is propelling himself and a lieutenant on to Amigo’s board. Mr Paton has quit, as have chairman Stephan Wilcke, and the head of the remuneration committee. It is hard to see this as consensus over strategy.

Mr Paton, recruited in July, had been bowing to the regulator’s tough talk on pricey lending. Amigo charges nearly 50 per cent interest to borrowers with shaky credit histories who are backed by pals or parents. This spring, the watchdog fretted about risk disclosure and borrowers being sucked into a never-ending cycle of debt. Mr Paton promised tighter credit checks, more focus on winning new customers rather than relending to existing borrowers, better handling of complaints and a more cautious take on bad debts. On November 28, he said relending rates were down and new customer numbers up a fifth, but warned on growth.

Mr Benamor, by admission a disrupter even as a youf, may have found another way. The market thinks so: Amigo shares rose a tenth on Monday. But the new way shouldn’t be the old, pre-float one. The FCA has already done for payday lending and may do the same for guarantor loans. The reality is that lenders cannot operate without regulatory approval; compliance is expensive; complaints more so. That is where Amigo is. Even if its founder would prefer it wasn’t.

HSBC: Quinn-essential
HSBC’s interim boss, Noel Quinn, has reshuffled the bank’s executives, hired a new chief operating officer and planned a restructuring. If he somehow is not given the permanent role, let’s hope he’s also installed Fortnite on his computer. Otherwise, his successor really won’t have anything to do.

>>> US Close Dow -0.38% S&P -0.32% Nasdaq -0.40% Russell -0.26%

Closing Stock Market Summary

The S&P 500 lost 0.3% on Monday, closing at session lows amid a lack of buying conviction. The Dow Jones Industrial Average declined 0.4%, the Nasdaq Composite declined 0.4%, and the Russell 2000 declined 0.3%. 

The lack of conviction was understandable considering that there was no reported progress on the U.S.-China trade front ahead of the Dec. 15 tariffs, which would presumably upset the market if they went into effect without a Phase One deal. There is still some time left this week to strike a deal, but the trade uncertainty helped keep risk sentiment in check. 

Losses were made most prevalent in the S&P 500 health care (-0.7%), utilities (-0.5%), and information technology (-0.5%) sectors. The latter was pressured by Apple (AAPL 266.92, -3.79, -1.4%), which pulled back from record territory. Conversely, the consumer staples (+0.2%), real estate (+0.1%), and consumer discretionary (+0.1%) sectors finished higher. 

Other key events this week will include policy decisions from both the Fed and ECB, a UK election, and reports on consumer prices and retail sales for November. Strikingly, the CBOE Volatility Index spiked 16.5% to 15.86, as demand for downside protection increased in anticipation for any disappoints. 

Corporate news didn't move the needle, but M&A activity and analyst recommendations did contribute to some notable stock reactions. 

In the biotech space, ArQule (ARQL 19.71, +10.04, +103.9%) agreed to be acquired by Merck (MRK 88.72, -0.13, -0.2%) for about $2.7 billion in cash. Synthorx (THOR 67.71, +42.68, +170.5%) agreed to be acquired by French company Sanofi (SNY 45.30, -0.73, -1.6%) for about $2.4 billion in cash. Evidently, both deals came at handsome premiums. 

Apple suppliers Qorvo (QRVO 108.44, +1.82, +1.7%) and Skyworks Solutions (SWKS 103.23, +1.87, +1.8%) outperformed after Bank of America/Merrill Lynch "double upgraded" the stocks to Buy from Underperform due to their 5G growth potential. 

U.S. Treasuries finished the session relatively unchanged. The 2-yr yield declined one basis point to 1.62%, and the 10-yr yield declined one basis point to 1.83%. The U.S. Dollar Index declined 0.1% to 97.64. WTI crude declined 0.4%, or $0.23, to $58.97/bbl. 

Investors did not receive any economic data on Monday. Looking ahead, investors will receive the NFIB Small Business Optimism Index for November and the revised Q3 readings for Productivity and Unit Labor Costs on Tuesday. 

  • Nasdaq Composite +29.9% YTD
  • S&P 500 +25.1% YTD
  • Russell 2000 +20.9% YTD
  • Dow Jones Industrial Average +19.6% YTD

FT : Tullow shares plummet 70% after group cuts production outlook

Tullow shares plummet 70% after group cuts production outlook
Chief executive and head of exploration leave FTSE 250 oil and gas explorer

Shares in Tullow Oil plunged more than 70 per cent after the FTSE 250 oil and gas explorer slashed its production outlook and announced the departure of its chief executive and head of exploration.

The decline knocked more than £1.4bn off the oil group’s market capitalisation and sent its stock to its lowest level since the end of 2000.

Tullow, which was founded in the 1980s to focus on frontier markets of the oil industry primarily in Africa, was worth as much as £14.5bn in 2012. It had been a favourite of UK investors and rode the boom in oil prices for more than a decade, with its shares rising by an average of almost 30 per cent a year between 2000 and 2012.

But it has stumbled in recent years as the era of $100-a-barrel crude oil came to an end with the rise of the US shale industry. The shares, which had already declined sharply from the company’s 2012 peak, closed down nearly 72 per cent on Monday, valuing Tullow at £562m.

Analysts and investors queried whether company executives had talked up Tullow’s prospects too aggressively as it sought to recover from the oil slump, wrongfooting those drawn to one of the few UK explorers still pursuing rapid growth.


Tullow said it expected production to be almost a third lower than it had forecast at the start of the year and also suspended its dividend. Paul McDade, chief executive and Angus McCoss, head of exploration, have left the group.

Dorothy Thompson, the former Drax boss and non-executive chair of Tullow, who has been appointed temporary executive chair, conceded there had been “material errors made in projecting forward production at Tullow”, saying the company had “done a lot of work in the last few weeks to make sure these errors are not repeated”.

She also sought to play down fears about the need for an immediate rights issue. “That is not something on our current agenda at all,” she said, but did not deny the company could be sold for the right price.

Last month, shares in Tullow fell to a two-year low after it said two significant discoveries in waters off Guyana contained heavy oil, prompting warnings that the projects would be difficult to commercialise.

The company now expects to generate just $150m of annual free cash, down from $500m previously, despite also cutting its plans for capital expenditure.

Henry Steel at London-based hedge fund Odey Asset Management, which has been betting against the company’s shares, said the “disaster” of the Guyana exploration update had already led to questions from investors about how Tullow could have talked up the finds without referring to the quality of the oil.

“Management had lost operating and exploration credibility,” Mr Steel said. “This is why the board has acted so decisively, finally.”

Analysts at Stifel said investors’ biggest immediate concern would be the strength of the balance sheet given the increased risk of a potential equity issuance to reduce debt because of the lower projected free cash flow

FT : SoftBank ditches stake in dog walking start-up Wag

SoftBank ditches stake in dog walking start-up Wag
Japanese company sells back nearly 50% stake to company

SoftBank Group agreed to sell its nearly 50 per cent stake in Wag back to the dog walking company, ending a disappointing investment for the Japanese company’s $97bn Vision Fund.

Wag told employees today it was “amicably parting ways” with SoftBank and that the investor would no longer hold a seat on the company’s board. It also said it would be eliminating job positions in order to “align our organisation with the needs of our business”.

SoftBank will lose money on the stake sale, which is expected to close this month, one person familiar with the deal said. The Japanese group previously pledged $300m in January last year, valuing the company at $650m

“As a more focused company with a solid capital base that is right-sized to the needs of our business and strategy, we have plenty of runway to execute our plans to accelerate our progress toward profitable growth,” Wag wrote in an internal memo, which was seen by the Financial Times.

“The decision to move in this direction was based on the strong conviction of our investors that this is the right course for the company.”

Wag is the latest disappointment for SoftBank following the failed initial public offering this year of one of its most high-profile investments, property company WeWork.

Wag’s buyback comes after the company last month announced chief executive Hilary Schneider would exit and be replaced by Garrett Smallwood.

The sale also followed discussions with potential acquirers for Wag’s business. SoftBank had pushed the company to cut costs further and consider a number of strategic alternatives, including liquidation, one person familiar with the talks said.

The Wall Street Journal first reported on the sale and Wag’s job cuts.

Handelsblatt : Financial Supervision examines Wirecard's communication

PAYMENT SERVICE
Financial Supervision examines Wirecard's communication

The payment service provider has often been criticized in the past for alleged manipulations. Bloomberg
The Wirecard headquarters in Aschheim near Munich

The payment service provider has often been criticized in the past for alleged manipulations.

Frankfurt, Munich The payment processor Wirecard can not speak of a peaceful Advent season. According to information from the Handelsblatt, the German financial regulator Bafin examines the communication of the controversial Dax Group. The Bafin had banned in the spring so-called short sales , which were used by speculators for betting on falling Wirecard courses.

In addition, the Bafin had been suspected that journalists of the British newspaper "Financial Times" (FT) have worked inappropriately with speculators who had attacked Wirecard. In view of the escalating dispute over the corporation, the supervisors are now stressing that they are not only looking at the opponents of Wirecard, but also at the group itself.

On Monday, Bafin said on Handelsblatt's request, "The fact that our investigations are going in all directions - and therefore also affecting Wirecard - is not new." It is also stated: "About the facts of the case reported to the Munich District Attorney's Office in April In addition, we further investigate whether market manipulation may also have been caused by incorrect / misleading information or the retention of ad hoc communications by Wirecard. "Hedge fund Greenvale Capital had filed a complaint against Wirecard for misleading information, according to the news magazine" Spiegel ".

Only at the end of September, the Bafin had demanded a fine of 1.5 million euros from Wirecard because of formal errors. At that time it was about missing signatures and a late announcement about where to find the semi-annual report 2018 on the Internet.

SUBJECTS OF THE ARTICLE
Wirecard Fintech exchange BaFin MasterCard
The fear of the authority to be perceived in the market as a quasi-extended arm of the group, is not unfounded: For example, in November, the Prague investment house "Krupa Global Investments" had its five-million-euro entry with Wirecard with the following statement: "The German Regulatory Authority Bafin and the German Government fully support Wirecard's mission and expansion. "An impression that does not meet with the overseers' approval.

Cash flow in focus
The group from Aschheim near Munich is under a press-drum fire after critical reports in the "Süddeutsche Zeitung", the "mirror" and the "FT". After another article by the British business newspaper, the share price on Monday fell by up to five percent, but later recovered significantly.

Essentially, the criticism can be summed up in two main allegations: Wirecard has therefore insufficiently informed the capital market about problematic facts and applies irregular accounting approaches. In the room there is a bad suspicion: Does the corporation, which surpasses its own forecasts year by year, economise less solidly than expected - and stuffs balance sheets with fresh funds?


Food received the latter accusation by the most recent "FT" article from this Monday. This covered the cash flow of Wirecard and its composition. Cash flow is considered to be an important indicator of the liquidity of a company and, in a simplified way, it compares the income of a group to the expenses. If it is permanently negative, liquidity problems threaten.

At first glance, there are no indications at Wirecard, on the contrary: Numerous analysts base their buy recommendation on, among other things, the strong cash flow. In 2018, this ratio rose to 500 million euros, while in 2014 it was only about 144 million euros. In particular, the cash flow from operating activities grew significantly, which is considered to be fundamentally reliable value on the stock market, but the cash flow is usually difficult to influence.

Questionable fiduciary funds
The "FT" refers to figures from the end of March 2017. At that time, the Group had a cash position of 1.45 billion euros. According to "FT", 334 million euros of this could have come from the opaque third party partner Al Alam from Dubai, who had been critically discussed in the past, and were located on so-called trust accounts.

The funds of other third party partners on trust accounts were added to the cash holdings. The FT quotes finance professor Collins Ntim of Southampton Business School, who calls this approach "aggressive accounting."

At Wirecard you can not understand the excitement. All cash positions have been correctly reported in accordance with the international accounting standard IFRS, according to Aschheim. The auditor EY have fully audited the correctness of the consolidated balance sheets of recent years.

The Wirecard Annual Report explicitly refers to its own interpretation of fiduciary accounts: "Acquiring accounts, some of which are not held directly but on behalf of Wirecard, are also reported under cash provided that Wirecard uses this money at short notice can dispose of. "

Criticism of communication
According to Wirecard, credit card networks such as Mastercard and Visa do not have direct relationships with local retailers, but via intermediate partners who settle the payments. These acquirers are basically interchangeable and connected to the Wirecard platform, the Group emphasizes.

A small percentage of the payments are withheld to be prepared for defaults and reversals. These funds are parked on fiduciary accounts. If there are no corresponding chargebacks, Wirecard can dispose of the funds within a short period of time. Since the Group bears the business risk, the allocation to the cash position according to this interpretation is correct in the balance sheet. An accountant who knows the payment industry well and was able to speak with the Handelsblatt, considers the approach to be fundamentally understandable. The problem is, however, the great importance of the partner Al Alam.

Wirecard has been suspected for some time that there may have been irregularities in the balance sheets in the past. The main reason for this is the complex business model. Most recently, the Handelsblatt had reported on the refused certification for the latest available balance sheet of the group's Singapore subsidiary. This had come under the headlines due to investigations by the local financial regulator.


In order to prevent such problems, the Group relies on a new internal reporting structure, which is intended to connect the local units more closely to the German headquarters with the help of regional "hubs". In addition, Wirecard commissioned a special audit of the balance sheet by KPMG. She started work with a 16-member team and summoned board members to the hearing within a short time. The investigation is conducted by three KPMG partners, including the German KPMG board member Sven-Olaf Leitz.

In addition, the Group wants to improve its capital market communication. "In our view, we are already the most transparent company in our sector. At the same time we are constantly looking for ways to optimize, "said a spokeswoman on Monday. According to insiders, Wirecard wants to explain the role of its third party partners even better in the coming days and is working on a corresponding presentation - the Group had already announced steps in the past.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • THO -4.1%

M&A news:

  • DPLO -31.7% (to be acquired by UnitedHealth's (UNH) OptumRx for $4.00/share in cash)

Other news:

  • KALV -17.7% (announced results of the Phase 2 clinical trial evaluating the use of KVD001 )
  • MNRL -4.4% (commences 11 mln common stock offering; 6 mln by the co and 5 mln by the selling stockholders)
  • SYNH -3% (approves expansion and extension of the Company's existing stock repurchase program)
  • AUPH -2.8% (commences registered underwritten public offering of $150 mln of its common shares)
  • ERIC -0.7% (reaches resolution on US FCPA Investigations; combined payment of $1.06 bln)
  • LITE -0.5% (to offer $850 mln aggregate principal amount of convertible senior notes due in 2026)

Analyst comments:

  • M -2.1% (downgraded to Sell at Goldman)
  • MMM -1.3% (downgraded to Neutral at Citigroup)
  • ORLY -1.3% (downgraded to Neutral from Buy at Goldman)