Adyen (AMS: ADYEN) (OTCPK: ADYYF) shares are down 26% today. ADYEN shares are down not because someone has discovered some ghastly replay of the Wirecard fraud but simply because the announced results are not very good. Which is a shame and all that but is also clearly not as bad as a repeat of that German experience.
Just to remind what happened at Wirecard. They were a German electronic payments processor. Who fiddled their numbers. Hugely and massively fiddled. The trick was that there are always chargeback provisions and Wirecard said it had those and they were in this and that bank. But those accounts were empty. If you do fiddle your sales numbers then there has to be somewhere the money goes - empty accounts masquerading as chargeback provisions was it.
Given this everyone’s ever so slightly worried about electronic payments processors. This makes share prices fragile but doesn’t mean that others are doing the same thing. But the fragility does mean that these results have a large effect on the share price of Adyen: “Shares in Dutch payments processor Adyen NV (ADYEN.AS) fell by more than 20% on Thursday after first-half earnings missed analysts' estimates and the company's own targets.”
Adyen share price from Google Finance
In more detail: “The hiring knocked the group’s profits in the first half of the year, as it reported earnings before interest, taxes, depreciation and amortisation of €320mn, below expectations of €365mn. Chief financial officer Ethan Tandowsky said: “Going into 2023, we said we expected to hire a similar amount of people as we did in 2022. We continue to plan to execute against those hiring plans.” Last year, the company added more than 1,000 staff. Adyen serves a range of clients including Spotify, Uber, Booking.com and Microsoft.”
Note the client list there. This is not the dodgy fly by nights that Wirecard pretended to service. We could also think of this as Adyen building the staffing to further expand the business - investment in growth even. But the market seems to be frowning on getting too far ahead of business volumes. “Revenue growth in the first half was impacted by pricing competition, as well as higher inflation and interest rates, the Amsterdam-based fintech company said on Thursday.” And that could be the real reason. For increased competition does not just reduce revenue it also compresses margins and lowers estimates of future growth.
The real point here though is that even with that general fragility of electronic payment system stories - engendered by that Wirecard episode - the Adyen results are driven by simple business concerns, not catastrophic revelations.