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Top Alex Darwall stock struck down in 'bear' raid

Shares in Wirecard, a German payment provider powering AA-rated manager's Jupiter European funds, tumble after attack on company.

 
Top Alex Darwall stock struck down in 'bear' raid

Wirecard AG, a German-listed payment provider that is a top holding of leading European fund manager Alexander Darwall, has been attacked in a ‘bear’ raid that has caused the stock to fall over 15%.

Shares in the Munich-based payments group, which have helped power Darwall's Jupiter European funds to the top of their sectors, plunged 20% last Wednesday after a previously unknown analyst company, Zatarra Research and Investigations, published a highly critical report on the group’s anti-money laundering controls.

Wirecard (WDIG.DE) has denied the allegations as ‘wholly untrue’ and ‘slanderous’ and told Bloomberg it had begun legal action.

According to the Financial Times, Zatarra is a new entity incorporated in the British Virgin Isles. It declined to comment to the newspaper last week but according to the FT describes itself as a boutique firm of investment professionals who may take positions in companies covered by its research.

Although Wirecard shares recovered some ground later in the week, the sell-off has left the stock 25% below its starting point in the New Year, valuing the high growth company’s market value at €4.5 billion (£3.5 billion).

Despite the setback, shareholders have nearly tripled their money in Wirecard over the past five years.

That performance has played its part in driving the funds of Citywire AA-rated Darwall (pictured) ahead of his rivals.

The company is the second biggest position in Darwall's Jupiter European Opportunities (JEO ) investment trust, accounting for 8.4% of its £624 million assets at the end of January. The trust has generated a 116% total return to investors over the past five years, nearly twice the average of its seven closed-end rivals.

In the past five days shares in the 35-strong portfolio have dipped 1.3% and are down over 5% since the start of the year. 

Wirecard was also the fourth biggest holding at 6.3% in Darwall’s Jupiter European fund at the end of last month. Over the five years to 31 January the £3.6 billion fund delivered 65% growth to rank third out of 103 funds in the Europe ex-UK sector for open-ended investment companies and unit trusts.

Darwall’s stakes have made Jupiter Fund Management (JUP) one of the group’s largest external shareholders with more than 6% of its shares, according to Thomson Reuters data.

Darwall declined a request to comment for this article. He has previously described Wirecard, which provides payment systems for businesses around the world, as a ‘digital winner’. The company has grown rapidly though a series of acquisitions and in 2014 – its last full-year of accounts – made profits before tax of €126 million, up from €82.7 million.

Some of Darwall’s rivals are not so sure. In comments after the slump in Wirecard’s shares, John Bennett, a Citywire AA-rated European fund manager at Henderson Global Investors, said he considered the group to be too complex: ‘I’d defy anybody to understand the Wirecard business model,’ he told journalists.

Bennett, whose funds include Henderson European Selected Opportunities and the Henderson European Focus Trust (HEFT ), said Darwall was an excellent growth fund manager but claimed Wirecard had become a ‘darling stock’.

He also revealed he had previously attempted to ‘short’ the shares through his Henderson European Absolute Return fund.

Bennett’s colleague Ollie Beckett formerly held the stock in the TR European Growth (TREG ) investment trust. However, in its annual report last year he said the position had been closed ‘as the valuation looked too stretched compared to the cash generation’.

Other leading managers hold smaller stakes in Wirecard. According to Thomson Reuters, the GAM Star Continental European Equity fund, run by Niall Gallagher, and the St James’s Place Worldwide Opportunities fund managed by Jonathan Asante of First State hold the stock. Both managers are A-rated by Citywire.

2 comments so far. Why not have your say?

Alan Selwood

Feb 29, 2016 at 17:32

It makes you wonder whether Zatarra was trying to manipulate the market for its own ends from a geographical location where scrutiny of its actions might be less easy than in Europe itself.

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mark sp

Mar 05, 2016 at 09:24

Nope, it doesn't make me wonder looks like they are pretty clear about it.. But the same was true of Quindell and Langbar. The key to all of these is to find the cash. Lots of revenue and lots of "profit" but where is the cash that comes from it. If the cash conversion rate is peculiarly low better to pass on the opportunity and if the business model is tricky to follow as well.................

Just because major funds are invested gives me no sense of security. Funds were in to QPP and Langbar as well. As an amateur I could see that there was something deeply wrong at langbar and that the QPP accounts were impossible as was the business model - the funds stayed in even when QPP started shorting their own stock with CFDs.

Companies that do lot of acquisition s can end up running for years without ever producing a meaningful set of accounts - the investor has to take all the adjustments on trust. No point in relying on the auditors - they get fined after the event and a scapegoat get a professional ban but I don't recall anyone in the UK being expected to make good all those who got wiped out when they assumed the accounts were true when in fact they were disinformation and downright lies

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