Wirecard shorter costs Sofina small billion in market value

18 mei 2022

19:26

The immensely wealthy Belgian Boël dynasty can wet the chest now that the British short Fraser Perring is after her investment company Sofina. Perring’s offensive, who previously helped the German tech giant off its pedestal, already cost Sofina a small billion in market value.

When Fraser Perring of Viceroy Research mentions your stock’s name, it’s rarely good news. Sofina, the Belgian holding company around the Boël family, also experienced this on Wednesday.

Shares plummeted after Perring said at a financial conference in Hamburg that he would buy Sofina

takes in view. In the end, Sofina closed the day with a loss of 8.6 percent at 257 euros. About 800 million euros in market value went up in smoke.

From work van de Boels

Perring’s attack isn’t the only problem tormenting Sofina. A few more issues weigh on the share price of the Brussels holding company, which has fallen by 40 percent since the New Year.
THG
THG, the British e-commerce company of which Sofina owns more than 8 percent, is also in the crosshairs of shorters. They do not believe that THG can deliver on the promises made for its high-tech platform Ingenuity and they also state themselves serious questions to management.
Temptations
This week was announced that the creditors of the online fashion retailer Zilingo immediately and in full recover their loans to that ‘Indian Zalando’† Earlier, the founder and CEO of the company had been sidelined. Sofina owned 7 percent of Zilingo at the end of last year.

Indian nugget

With such a scalp on his belt, it is understandable that the market reacts nervously to his demarche around Sofina. The reason for his distrust is Byju’s, an important holding of the holding company. The Indian developer of education apps, which has experienced explosive growth in recent years, is valued at 22 billion euros.

For Sofina, which has built up a stake of more than 5 percent in Byju’s since 2016, the ‘Indian nugget’ has gradually become one of the most important participations. At current valuations, Sofina’s stake in Byju’s is worth just over a billion euros and the Indian tech company represents about 12 percent of its investment portfolio.

But Perring questions the skyrocketing valuation that’s being placed on Byju’s. “They are cheating in India,” says the shorter.

In an interview with the German business magazine Capital, which was published in connection with the event in Hamburg, Perring states that Byju’s realizes much of its turnover by selling tablets to people who cannot afford such costs. That finding sets off alarm bells for him, it sounds.

800 million

Due to the fall in price, Sofina saw 800 million euros in stock market value go up in smoke in one day.

Important: Perring does not accuse Sofina of fraud herself. But the holding company, he says, is valued as if everything is perfect, while questions arise at Byju’s. Perring also points out that holding companies quote on average with a discount of 30 to 40 percent on the value of the portfolio, which is not the case with Sofina. “That premium for Sofina is not justified because of Byju’s,” said the Brit.

Fraser Perring.
©Bloomberg

During the conference in Hamburg, Perring said that he would short the stock immediately after his presentation. Investors then sold Sofina en masse. In fifteen minutes on Wednesday afternoon, as many shares of the holding company were traded as in a full normal trading day. At one point, the stock fell 12 percent.

‘Finance as art’

The Boël family owns 54.5 percent of Sofina. Due to the price fall on Wednesday, she saw the value of her participation evaporate by half a billion euros. On Tuesday evening the package was worth 5.25 billion euros, 24 hours later it was ‘only’ 4.8 billion.

Perring does not accuse Sofina of fraud herself. But he says the holding is valued as if everything is perfect, while questions arise about its participation in Byju’s.

Sofina declined to comment on Wednesday. Holding sources say Perring’s attack comes as a complete surprise. The shorter would never have contacted the company beforehand.

Last week, during Sofina’s general meeting, shareholders also asked how the holding company puts a correct value on its unlisted investments. The answer then was that Sofina’s portfolio is examined three times: first through an internal audit, then through an external consultant and finally through the auditor. ‘That shows that finance is not a science, but an art’, said chairman Dominique Lancksweert at the time.

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