September 9, 2019
As we’ve been searching for where Wirecard’s MCA business is (and the bulk of it looks not to be in Brazil, Turkey or Europe), we’ve come across a number of details that have made us take a second look at certain aspects of the business. There are some very odd coincidences and complicated relationships between Wirecard, its current and former executives, and third-party companies, many of which are suspicious in themselves, and, when taken together, raise yet more questions.
A company in Singapore, oCap Management, formerly called Senjo Trading, whose MD, Carlos Haeuser worked for 13 years at Wirecard as a senior executive, started claiming to offer merchant cash advance in Singapore in November 2018 at around the same time it received from an unknown third party. (Coincidentally, this is also the time when Wirecard started talking about MCA). By the end of December 2018, €113M of these funds had been lent out by oCap, without any sales people and without any advertising spend, and with distribution expenses of just $38K.
Until 2017, oCap was involved in trade financing and ship management, but also referenced etrade finance and blockchain technology on their website. However with Carlos’ arrival, and promotion to MD on the 9th of November 2018, the business shifted tack to offer MCA. Their level of success in just one month seems remarkable considering that, despite claiming to have facilitated $100M of loans in 2017 they had zero revenues in 2017 from interest income. Rather, in 2017 all revenues – on the basis of their audited accounts – were derived from ship management fees.
Following the €115M loan in late 2018, and in just 6 weeks, oCap somehow lent all that of money onwards in EUR, USD and GBP denominated loans from Singapore.
Furthermore in 1Q19, when Wirecard’s MCA program grew further to €400M, oCap formed a Luxembourg subsidiary that is described as “acquiring or assuming the risks associated with loans receivable”.
oCap has multiple close ties to Wirecard, making the timing of their MCA business launch interesting:
While this could all be a coincidence, it is worth examining closely in light of the criminal “round-tripping” investigation that Wirecard is facing in Singapore, where the CAD is investigating Wirecard for allegedly moving money from its balance sheet to undisclosed related parties and then back as revenue, earlier in 2018 than the events described above. We think the CAD in Singapore should be aware of the suspicious timing and similarities of these events.
The FT has previously reported that Senjo (now oCap) had significant unpaid receivables at Wirecard and that a substantial portion of their revenues and EBITDA come from Senjo. It seems reasonable to conclude that Wirecard was the 3rd party that lent the €115M to Senjo. If any of this money has made it back to Wirecard to pay-off the receivables that are owed by Senjo/oCap – that would be round-tripping.
If any of this is true, investors should be very concerned about the quality of that EBITDA given the very curious accounts at oCap / Senjo Trading.
Wirecard claims that it is lending €370M via MCA. This number has fallen, since the previously stated €400M. They’ve also changed their statements regarding where this money is being lent, telling investors at the H1 results call that it’s now less than 1/3 in Brazil and Turkey. According to their CPO, it’s not in Europe. There aren’t a lot of places left it could be, and Wirecard refuses to disclose to investors where it is (contrary to Markus Braun’s statements re transparency).
|Wirecard Brazil (€M)||Our|
|Company Reported MCA||400||400|
|Brazil % Estimate||40%|
|Brazil MCA Estimate||160||160|
|Monthly Credit Volume||37.2||37.2|
|Calculated MCA Balance||18.6||18.6|