Whitney Tilson’s electronic mail to traders discussing the Wirecard fraud; Bankrupt Hertz Suspends $500 Million Stock Sale; 20-12 months-Previous Robinhood buyer dies by suicide.
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Q1 2020 hedge fund letters, conferences and moreThe Huge Fraud At Wirecard
1) Large kudos to Carson Block of Muddy Waters Analysis, Gabriel Grego of Quintessential Capital Administration, Roddy Boyd of the Southern Investigative Analysis Basis, Dan McCrum of the Monetary Occasions, and plenty of others for fully nailing the large fraud at German funds processor Wirecard AG (ETR:WDI), which was as soon as thought-about the nation’s pre-eminent fintech participant.Within the mid-1950s, Warren Buffett began shopping for shares in a net-net alternative known as Dempster Mill for his funding partnerships. In his 1961 letter to companions, Buffett described the corporate as “a producer of farm implements and water techniques with gross sales in 1961 of about $9 million.” Q1 2020 hedge fund letters, conferences and extra He Learn MoreAfter its auditor, EY, refused to log off on the corporate’s accounts final week, the stock has fallen by 85% previously three buying and selling periods… wiping out greater than $10 billion in market value.
Since Wirecard is a German firm, many People may not be following this story… However what occurred right here is worth learning as a result of it is a good case research in a dozen other ways – the ineptness and complicity of regulators and the media, how an apparent fraud might proceed for therefore lengthy, and so on.I might been warning my readers about it for greater than a yr. On March 20, 2019, I wrote:
In my e-mail on March 6, I included Carson Block’s good essay about Germany’s disgraceful and misguided assaults on brief sellers who’re exposing frauds there: Why Elon Musk Ought to Record Tesla Shares in Germany. Block particularly talked about Wirecard, which many savvy brief sellers I do know have lengthy believed is a complete fraud. He wrote:
Proper now, German authorities are subjecting journalists, brief sellers and analysts to felony investigations for exposing alleged fraud and cash laundering at one in all their now largest public corporations (by market cap). That firm, a cost processor known as Wirecard, till just lately had a market cap over €20 billion. Because the operator of a worldwide funds enterprise, it must be liable for making certain illicit cash from criminals and terrorists are saved out of its community, which is a gateway to the worldwide banking system.
Final evening, investigative journalist Roddy Boyd of the Southern Investigative Analysis Basis (“SIRF”), who has a unprecedented monitor report exposing company fraud and malfeasance, revealed the outcomes of his newest in-depth have a look at the corporate – and it is damning: Wirecard AG: One thing Is Terribly Unsuitable Right here.
On October 21, I wrote:
Brief-sellers have lengthy focused German payment-processor Wirecard, with little to indicate for it however endless ache because the stock rose greater than 300% from early 2017 by way of August 2018… However they may have the final snicker, as proof of fraud continues to mount and the stock tumbles. Kudos to Dan McCrum of the Monetary Occasions for some glorious investigative journalism: Wirecard’s suspect accounting practices revealed.
I concluded: “This firm has a market cap of round $15 billion and will blow sky-high…”
On December 12, I added:
Kudos to the Monetary Occasions for its ongoing brave reporting on German funds big Wirecard, which many good brief sellers I do know assume is a home of playing cards. This is the most recent (when you assume Wirecard did not know all about this surveillance operation that focused brief sellers, please contact me, as I’ve a bridge to promote you…): Wirecard critics focused in London spy operation.
For extra on this sordid scandal, see this 31-post Twitter thread.
Bankrupt Hertz Suspends $500 Million Stock Sale
2) In my e-mail on June 12, I wrote:
This is likely one of the scummiest issues I’ve ever seen. It is going to be a complete shame if the court docket overseeing the Hertz (HTZ) chapter and/or the SEC enable Hertz to situation fairness!
Since then, jeers to the court docket, which accredited the providing, however cheers to the SEC, which – within the nick of time – stepped in to dam the $500 million fleecing of a bunch of naïve, day-trading Robinhood-type traders… Bankrupt Hertz Suspends $500 Million Stock Sale as SEC Poses Questions on Deal.
20-12 months-Previous Robinhood buyer dies by suicide
3) Talking of Robinhood, that is what can occur when regulators fail to rein in corporations that exploit many of us’ investing ignorance mixed with a want to gamble and get wealthy fast: 20-12 months-Previous Robinhood Buyer Dies By Suicide After Seeing A $730,000 Adverse Stability.
I am going to consider this once I see it:
Robinhood’s founders have since responded to Kearns’ loss of life by suicide, pledging main modifications to their platform – particularly round choices buying and selling.