SoftBank executives set to lose hundreds of millions on complex Wirecard trade inspired by Warren Buffett

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FILE PHOTO: A man walks past the Wirecard booth at the computer games fair Gamescom in Cologne, Germany, August 22, 2018. REUTERS/Wolfgang Rattay

Wirecard’s share price has tanked 80% since its accounting practices were called into question. On Monday the company said that roughly $2 billion in cash missing from its balance sheet likely does not exist.
The plummeting share price has erased hundreds of millions of dollars of profits for a group of SoftBank executives and an Abu Dhabi fund that were part of a complicated trade on the company’s stock, The Financial Times reported Tuesday.
The complex $1 billion trade was inspired by Warren Buffett, according to the FT.
on Business Insider.

Wirecard’s plummeting stock price has erased hundreds of millions of dollars of profits for a group of SoftBank executives and an Abu Dhabi fund that were part of a complex trade on the company’s stock, The Financial Times reported Tuesday.

In April last year, SoftBank Investment Advisors, which manages the group’s $100 billion Vision Fund, structured a roughly $1 billion investment in Wirecard through a convertible bond, a type of debt that can be repaid in stock instead of cash, according to the FT.

The deal gave the German payment company a vote of confidence, even though its accounting practices were already being questioned, according to the report.

Wirecard stock has tanked more than 80% in recent days following questions about the company’s accounting practices. On Monday, Wirecard said $2 billion in missing cash from its balance sheet likely doesn’t exist.

But in September 2019, just one day after SoftBank officially inked the deal, SBIA cut its exposure to Wirecard by selling new bonds that could be exchanged for the company’s stock, the FT reported.

Then, Credit Suisse sold the roughly $1 billion debt instrument to a group of investors, which gave SBIA the ability to fund the entire investment without putting up any of its own money. The group also gained tens of millions in upfront cash profits, according to the report.

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The tricky deal was thought up by Akshay Naheta, a close colleague of Rajeev Misra, who runs the Vision Fund and is Masayoshi Son’s chief lieutenant, the FT reported.

Another senior SoftBank executive told the FT that the deal was inspired by Warren Buffett, the so-called Oracle of Omaha. Buffett has a history of using structured investments to drive returns.

But, the original investment did not come from SoftBank, according to the report. Instead, it was funded by a group of individual employees of SoftBank, including Naheta and Misra, as well as Abu Dhabi’s sovereign wealth fund Mubadala.

While controversial, there is no suggestion that the complicated investment is unlawful, the FT reported.

Now, the SBIA fund is set to lose out on hundreds of millions in profits that it might’ve reaped from the Wirecard trade, according to the report. However, its initial $1 billion investment is protected — the …read more

Source:: Business Insider

      

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