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How Adyen benefits from the Wirecard scandal

VA short while ago they were rivals in the processing of payments, but the situation has changed dramatically in just six months: While only a heap of rubble remains from the former high-flyer Wirecard, the figures of the former competitor Adyen have increased in stark contrast beautifully developed.

Since the beginning of the year, the share price has almost doubled with an increase of more than 90 percent. The share is currently listed at 1420 euros. Adyen puts a stock market value of 42 billion euros on the scales. For comparison: the German car manufacturer Daimler has a stock market valuation of 44.6 billion euros. Of the 29 analysts surveyed by Bloomberg, only five recommend selling Adyen shares. The rest advise buying or holding. The price / earnings ratio is still extremely high, even for a growth value, at around 220; the value for these companies usually fluctuates around 30.

The financial service provider based in Amsterdam, which processes payments between end customers and retailers, has developed into a European industry heavyweight since it was founded in 2006. In addition to Ebay, Uber and Spotify, Adyen’s customers also include the German online retailer Zalando. This year, two topics in particular have given the share price additional tailwind: the corona pandemic, which has once again intensified the trend towards online trading, and the spectacular case of the Aschheim-based payment service provider Wirecard.


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To the detailed view

Will Adyen benefit from the Wirecard scandal?

According to the half-yearly financial figures published on Thursday, Adyen processed payments totaling 129 billion euros in the first six months – around a quarter more than a year earlier. Sales also rose in the first half of the year by 27 percent to around 280 million euros. As expected, revenue from the travel industry fell, but the rise in digital commerce more than made up for the losses.

Adyen never forgets to emphasize how much the Wirecard scandal has damaged the reputation of payment service providers. In an interview with F.A.Z., Adyen boss Pieter van der Does said that a fraudulent “player” in the field is bad for everyone in the industry. However, the company itself benefits like no other. For example, former Wirecard customers approached the Dutch financial services provider, and they addressed others themselves.

This applies above all to the Asia and Pacific region. This could make Adyen stronger in this market, which together with Latin America still makes the least contribution to sales. Although sales growth was highest in North America at 58 percent compared to the previous year, the Asia and Pacific region followed with a growth rate of 28 percent. Van der Does emphasizes, however, that only a few dealers were added in the region, but that they did not significantly affect the overall business.

At first glance, however, it is surprising that, despite the strong sales growth, the bottom line was less than a year ago. In the first half of the year, net income fell by 15 percent to 78.4 million euros compared to the previous year. In its semi-annual report, Adyen vaguely writes that this is a result of the movement in other financial results, triggered by the strong share price performance. To put it more clearly, so-called “warrants” are primarily responsible for the decline in net income, according to the request.

The American online auction house Ebay was able to acquire such warrants from Adyen a good two years ago, provided that the company primarily relies on the services of Adyen for payment processing. The warrants give Ebay the opportunity to buy shares in Adyen at a previously negotiated price. Since the price has nearly exploded since the IPO in 2018 – it climbed more than 480 percent – the profit-taking of Ebay increased with it, should the company exercise its rights.

Ebay has not yet done that because the company has not yet reached the minimum trading volume with Adyen agreed in the contract, according to the Amsterdam-based company. This is probably also due to the fact that the contract between Ebay and the American payment service provider Paypal only recently expired. Thus, according to Adyen, it is not a “real loss” because it has not yet been realized and in the future it will also depend on the trading volume Ebay brings to the Dutch payment service provider. The contract is profitable in every scenario.

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