European Event-Driven Analyst

Patryk Basiewicz

PGB Research

Forensic Accounting

Network International Holdings / Forensic Accounting

<a href="https://www.smartkarma.com/entities/network-international-holdings-plc" target="_blank" rel="noopener">Network International Holdings (NETW LN)'</a>s share price has fallen by half this year. Though much of this decline likely occurred due to COVID-related hit in its brick-and-mortar retail/tourist business, it is quite likely that <a href="https://www.smartkarma.com/entities/wirecard-ag" target="_blank" data-smartkarma-citation="entities:21743:1" rel="noopener">Wirecard AG (WDI GR)</a> crisis had a part to play. Seemingly, there are several parallels. There are already some Twitter haters out there. 
Below I analyse <a href="https://www.smartkarma.com/entities/network-international-holdings-plc" target="_blank" data-smartkarma-citation="entities:28918:1" rel="noopener">Network International Holdings (NETW LN)</a> cash flow dynamics using the information they provided in public disclosure. I do that because Wirecard's poor cash generation was the canary in the coal mine, that many (myself included) overlooked and downplayed. I show how different business models between NETW and Wirecard lead to different adjustments of reported cash flow figures. Note that, just like Wirecard, NETW does not disclose cash flow in a way that fully reflects economic reality.

Network International Holdings (NETW LN)'s share price has fallen by half this year. Though much of this decline likely occurred due to COVID-related hit in its brick-and-mortar retail/tourist business, it is quite likely that Wirecard AG (WDI GR) crisis had a part to play. Seemingly, there are several parallels. There are already some Twitter haters out there. 
Below I analyse Network International Holdings (NETW LN) cash flow dynamics using the information they provided in public disclosure. I do that because Wirecard's poor cash generation was the canary in the coal mine, that many (myself included) overlooked and downplayed. I show how different business models between NETW and Wirecard lead to different adjustments of reported cash flow figures. Note that, just like Wirecard, NETW does not disclose cash flow in a way that fully reflects economic reality. 

Network International (NETW LN): It Is Not Wirecard Just Yet. Cashflow Comparison.

Founder & CEO Bond Angle, LLC, Bond Angle, LLC

Vicki Bryan

Founder & CEO Bond Angle, LLC

Bond Angle, LLC

Insightful commentary and analysis on bond markets and market movers, including financial, economic, and industry catalysts and management shenanigans. 

High yield market investment research

Credit

Sold! Softbank is said to be closing in on a deal to sell <a href="https://www.smartkarma.com/entities/arm-holdings-plc" target="_blank" rel="noopener">Arm Holdings (ARM LN)</a> to <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" rel="noopener">NVIDIA Corp (NVDA US)</a> for more than $40 billion in cash and stock in a deal that could be announced as soon as Monday, according to reports out today by <a href="https://www.wsj.com/articles/softbank-nearing-deal-to-sell-arm-holdings-to-nvidia-for-more-than-40-billion-11599928360?mod=hp_lead_pos1" target="_blank" rel="noopener">The Wall Street Journal</a> and <a href="https://www.ft.com/content/6bfe40a5-2426-4743-98cd-6fed9dd01b98" target="_blank" rel="noopener">Financial Times</a>.
This finally may be some good news for Softbank's investors, shaken by news last week that it had launched a <a href="https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753fa2" target="_blank" rel="noopener">massive options program so large it helped move markets</a> on stocks it just bought. 
This was funded with cash Softbank had said it must protect against conditions too risky to allow it to execute promised stock buybacks and debt repayment to repair its damaged balance sheet (read more in <a href="https://www.smartkarma.com/insights/softbank-s-son-feeling-the-force-with-options-funded-with-cash-it-had-pledged-to-protect" target="_blank" rel="noopener">Softbank's Son "Feeling The Force" With Options Funded With Cash It Had Pledged To Protect</a> on 9/8/20).
I warned last week Softbank had deliberately withheld and misrepresented material information about such a dramatic change in strategy direction and risk in its earnings presentation to investors just weeks ago.
On Saturday, Softbank's top investors went straight to the top to find out why—the answer is troubling, but not surprising.
<div class="content-highlight">
Read on for Bond Angle commentary.
</div>

Sold! Softbank is said to be closing in on a deal to sell Arm Holdings (ARM LN) to NVIDIA Corp (NVDA US) for more than $40 billion in cash and stock in a deal that could be announced as soon as Monday, according to reports out today by The Wall Street Journal and Financial Times.
This finally may be some good news for Softbank's investors, shaken by news last week that it had launched a massive options program so large it helped move markets on stocks it just bought. 
This was funded with cash Softbank had said it must protect against conditions too risky to allow it to execute promised stock buybacks and debt repayment to repair its damaged balance sheet (read more in Softbank's Son "Feeling The Force" With Options Funded With Cash It Had Pledged To Protect on 9/8/20).
I warned last week Softbank had deliberately withheld and misrepresented material information about such a dramatic change in strategy direction and risk in its earnings presentation to investors just weeks ago.
On Saturday, Softbank's top investors went straight to the top to find out why—the answer is troubling, but not surprising.

Read on for Bond Angle commentary.


Softbank Wrapping up Arm Sale While Wrestling With Alarmed Investors

<a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> was revealed on Friday as the massive NASDAQ whale helping to drive unprecedented option volume in recent weeks with its multi-billion dollar call-buying spree in the biggest tech names, as reported by <a href="https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753fa2" target="_blank" rel="noopener">Financial Times</a> and <a href="https://www.wsj.com/articles/softbanks-bet-on-tech-giants-fueled-powerful-market-rally-11599232205" target="_blank" rel="noopener">The Wall Street Journal</a> which confirmed speculation Thursday by <a href="https://www.zerohedge.com/markets/speculation-emerges-over-identity-mystery-marketwide-call-buyer" target="_blank" rel="noopener">Zero Hedge</a>.Softbank's option trades added to $40 billion in call-buying over the past month traced to retail investors. The resulting frenzy netted Softbank <a href="https://www.ft.com/content/53aa19bb-fc9a-46fd-aafd-4bc3669ab161" target="_blank" rel="noopener">$4 billion in option trading gains—on paper—</a>on its own <a href="https://www.wsj.com/articles/softbanks-bet-on-tech-giants-fueled-powerful-market-rally-11599232205" target="_blank" rel="noopener">$50 billion notional exposure</a>. By comparison, Softbank's newly acquired long positions in <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a>, <a href="https://www.smartkarma.com/entities/alphabet-inc-cl-c" target="_blank" data-smartkarma-citation="entities:11369:1" rel="noopener">Alphabet Inc Cl C (GOOG US)</a>, <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a>,  and <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> are worth just <a href="https://www.ft.com/content/3eec59a3-cb51-487c-aacd-68a0c7e46f2f" target="_blank" rel="noopener">$2 billion</a>, almost all that's left of the $10 billion Softbank spent late in the June quarter buying and selling mostly tech stocks at heady prices. Those holdings now are also subject to sharp declines triggered when Softbank's option scheme was revealed. Sure enough, Softbank <a href="https://www.ft.com/content/9e5827e9-893a-453e-b28d-88c1c0adc9d5" target="_blank" rel="noopener">lost $9 billion in market value</a> on Monday.There's plenty of intense scrutiny underway to understand these trades and what their impact ultimately proves to be. I'm more interested in Softbank's drastic change in strategy and its alternative deployment of cash from $40 billion raised in stock fire sales forced by its wary banks and legacy mega-investors who cut him and Softbank off after decades of seemingly endless billions in available funding when his recklessness netted Softbank and Vision Fund tens of billions of dollars in record losses. This certainly is not what Softbank told investors to expect mere weeks ago.Instead, Softbank's actions signal arrogance, or desperation, or worse—that CEO Masayoshi Son feels unrestrained and back in his Star Wars Zone with $40 billion in fresh cash.<div class="content-highlight">Read on for a Bond Angle deep dive into the belly of Softbank, The Whale, and what Son feels free to do with its $40 billion in cash that was pledged to bolster Softbank's bloodied balance sheet.</div>

Softbank Group (9984 JP) was revealed on Friday as the massive NASDAQ whale helping to drive unprecedented option volume in recent weeks with its multi-billion dollar call-buying spree in the biggest tech names, as reported by Financial Times and The Wall Street Journal which confirmed speculation Thursday by Zero Hedge.Softbank's option trades added to $40 billion in call-buying over the past month traced to retail investors. The resulting frenzy netted Softbank $4 billion in option trading gains—on paper—on its own $50 billion notional exposure. By comparison, Softbank's newly acquired long positions in Amazon.com Inc (AMZN US), Alphabet Inc Cl C (GOOG US), Microsoft Corp (MSFT US),  and Tesla Motors (TSLA US) are worth just $2 billion, almost all that's left of the $10 billion Softbank spent late in the June quarter buying and selling mostly tech stocks at heady prices. Those holdings now are also subject to sharp declines triggered when Softbank's option scheme was revealed. Sure enough, Softbank lost $9 billion in market value on Monday.There's plenty of intense scrutiny underway to understand these trades and what their impact ultimately proves to be. I'm more interested in Softbank's drastic change in strategy and its alternative deployment of cash from $40 billion raised in stock fire sales forced by its wary banks and legacy mega-investors who cut him and Softbank off after decades of seemingly endless billions in available funding when his recklessness netted Softbank and Vision Fund tens of billions of dollars in record losses. This certainly is not what Softbank told investors to expect mere weeks ago.Instead, Softbank's actions signal arrogance, or desperation, or worse—that CEO Masayoshi Son feels unrestrained and back in his Star Wars Zone with $40 billion in fresh cash.Read on for a Bond Angle deep dive into the belly of Softbank, The Whale, and what Son feels free to do with its $40 billion in cash that was pledged to bolster Softbank's bloodied balance sheet.

Softbank's Son "Feeling The Force" With Options Funded With Cash It Had Pledged To Protect

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

STOXX will announce the results of the September review of the DAX indices on 3 September post market close. The constituent changes will be effective from the close of trading on 18 September and passive funds indexed to the DAX will need to trade at the time.STOXX has clearly flagged <a href="https://www.smartkarma.com/entities/wirecard-ag" target="_blank" data-smartkarma-citation="entities:21743:1" rel="noopener">Wirecard AG (WDI GR)</a> as not eligible for index membership and the stock will be deleted. We see <a href="https://www.smartkarma.com/entities/delivery-hero-ag" target="_blank" data-smartkarma-citation="entities:24416:1" rel="noopener">Delivery Hero Ag (DHER GY)</a> as a high probability addition replacing <a href="https://www.smartkarma.com/entities/wirecard-ag" target="_blank" data-smartkarma-citation="entities:21743:1" rel="noopener">Wirecard AG (WDI GR)</a>. The change could happen as soon as 21 August if the STOXX consultation on deleting companies that have filed for insolvency immediately gets enough support (which it most probably will). The results of the consultation should be announced later today.We also see a high probability of <a href="https://www.smartkarma.com/entities/covestro-ag" target="_blank" data-smartkarma-citation="entities:21574:1" rel="noopener">Covestro AG (1COV GR)</a> being deleted from the DAX, but it could still remain in the index if <a href="https://www.smartkarma.com/entities/thermo-fisher-scientific-inc" target="_blank" data-smartkarma-citation="entities:7375:1" rel="noopener">Thermo Fisher Scientific Inc (TMO US)</a>'s tender offer for <a href="https://www.smartkarma.com/entities/qiagen-nv" target="_blank" data-smartkarma-citation="entities:26865:1" rel="noopener">QIAGEN NV (QIA GY)</a> is successful. Results of the tender off will be announced 13 August or soon after.

STOXX will announce the results of the September review of the DAX indices on 3 September post market close. The constituent changes will be effective from the close of trading on 18 September and passive funds indexed to the DAX will need to trade at the time.STOXX has clearly flagged Wirecard AG (WDI GR) as not eligible for index membership and the stock will be deleted. We see Delivery Hero Ag (DHER GY) as a high probability addition replacing Wirecard AG (WDI GR). The change could happen as soon as 21 August if the STOXX consultation on deleting companies that have filed for insolvency immediately gets enough support (which it most probably will). The results of the consultation should be announced later today.We also see a high probability of Covestro AG (1COV GR) being deleted from the DAX, but it could still remain in the index if Thermo Fisher Scientific Inc (TMO US)'s tender offer for QIAGEN NV (QIA GY) is successful. Results of the tender off will be announced 13 August or soon after.

DAX Index Rebalance Preview - Delivery Hero an Inclusion Shoo-In, Covestro Is at Risk

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Insolvency Filing: Wirecard’s (WDR.GY) ongoing last minute negotiations with lenders (including the purported debt for equity swap and asset sales) fell apart, as the management board filed a surprise application for the opening of insolvency proceedings with the district court of Munich;*Risk Exposures Identified: The financial media has widely reported that the EUR 1.75 bn revolver has been almost fully drawn upon at approximately EUR 1.6 bn; and  *Sad Chapter Draws To A Close: Another sad chapter in European banking has now come to an abrupt close. Regulatory reform remains a political hot potato but there is zero evidence of resolve given the conflicted rating agencies, auditing business models, feckless regulators et al.

*Insolvency Filing: Wirecard’s (WDR.GY) ongoing last minute negotiations with lenders (including the purported debt for equity swap and asset sales) fell apart, as the management board filed a surprise application for the opening of insolvency proceedings with the district court of Munich;*Risk Exposures Identified: The financial media has widely reported that the EUR 1.75 bn revolver has been almost fully drawn upon at approximately EUR 1.6 bn; and  *Sad Chapter Draws To A Close: Another sad chapter in European banking has now come to an abrupt close. Regulatory reform remains a political hot potato but there is zero evidence of resolve given the conflicted rating agencies, auditing business models, feckless regulators et al.  

Germany

Wirecard AG offers Internet payment and processing services.  The Company provides software and systems for online payment, electronic funds transfer, fraud protection and enterprise solutions.  Wirecard also offers call center services.

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Wirecard AG (WDI GR)

Network International (NETW LN): It Is Not Wirecard Just Yet. Cashflow Comparison.

Network International does not seem like another Wirecard-type scandal just yet. But, reading its cash flow structure is equally hard. I try to...

Patryk Basiewicz

Softbank Wrapping up Arm Sale While Wrestling With Alarmed Investors

Sold! Softbank has agreed to sell Arm Holdings (ARM LN) to NVIDIA Corp (NVDA US) for more than $40 billion in cash and stock in a deal that could...

Vicki Bryan

Softbank's Son "Feeling The Force" With Options Funded With Cash It Had Pledged To Protect

The market is eager to know what Softbank plans to do with a burgeoning war chest from bigger and bigger stock sales. The better question is why...

Vicki Bryan

DAX Index Rebalance Preview - Delivery Hero an Inclusion Shoo-In, Covestro Is at Risk

STOXX will announce the results of the September review of the DAX indices on 3 September post market close. The constituent changes will be...

Brian Freitas

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Network International (NETW LN): It Is Not Wirecard Just Yet. Cashflow Comparison.

Network International does not seem like another Wirecard-type scandal just yet. But, reading its cash flow structure is equally hard. I try to...

Patryk Basiewicz

Softbank Wrapping up Arm Sale While Wrestling With Alarmed Investors

Sold! Softbank has agreed to sell Arm Holdings (ARM LN) to NVIDIA Corp (NVDA US) for more than $40 billion in cash and stock in a deal that could...

Vicki Bryan

Softbank's Son "Feeling The Force" With Options Funded With Cash It Had Pledged To Protect

The market is eager to know what Softbank plans to do with a burgeoning war chest from bigger and bigger stock sales. The better question is why...

Vicki Bryan

DAX Index Rebalance Preview - Delivery Hero an Inclusion Shoo-In, Covestro Is at Risk

STOXX will announce the results of the September review of the DAX indices on 3 September post market close. The constituent changes will be...

Brian Freitas

Wirecard – The Cookie Crumbles

*Insolvency Filing: Wirecard’s (WDR.GY) ongoing last minute negotiations with lenders (including the purported debt for equity swap and asset...

Thomas J. Monaco