"Fake it til you make it" isn't just for tech startups. A lot of companies juice results with a bit of fraud, but eventually get good real results anyway. It's hard to tell the difference between an outright fraud and a healthy company with aggressive accounting.
[citation needed]
Just like the other MLMs (or rather pyramid schemes, because that's what they really are), they sell a (unprofitable) lifestyle using deceptive marketing. The products are secondary (they're just there to keep regulators at bay) and are always sub-par and inferior to what can be found off-the-shelf.
Furthermore, most of these luxury goods have actual value. Even if you are stupid enough to go into tons of debt and fill your garage with Harleys, there will be plenty of buyers who will be happy to take it from you at a small loss. In comparison, nobody will buy a garage full of Herbalife - the cost of shipping would be more expensive than the market value of the product itself.
It's basically just a better marketed MLM company, I first realised about the MLM part 12 or 13 years ago when I went to one of their presentations in my city (got out as soon as I could), which I guess leaves them with the "better marketing" part, which I admit they're pretty good at (if I'm not mistaken at some point they were sponsoring the football team AC Milan and the football player David Beckham).
* They tie big names into the firm to get credibility. Hire them into the board, or pay them good money for short term consulting gigs.
Examples:
1) Gen. James Mattis was in Theranos board. So was Henry Kissinger and George Shultz.
2) Enron paid Paul Krugman $50,000 to attend at least two times in advisory board meetings, nothing related to Enron business. What Enron really bought was the ability to say Paul Krugman was in the advisory board. https://www.princeton.edu/~pkrugman/enron.html
> That is a pretty stunning board of directors as well. I don't doubt their CEO can get an introduction to, and lunch with, nearly anyone on the planet.
> This board seems heavily geared to do deals for defense-related applications. That's fine; getting deals with the Armed Forces and VA is feasible and quite rewarding. What they overtly lack is connections to the healthcare world. I'm surprised they aren't publicly roped into Cleveland Clinic, Mayo Clinic or Kaiser, as they to support novel technologies in this space. I suppose you can argue that the business model is fundamentally incompatible, but I've seen Mayo and Kaiser go in anyway; they can acquire these labs and roll them into operations pretty easily.
> That BOD is stunning with heavy national security/ military operations. I almost thought it was a CIA cover company.
> So, it's a health testing company that will keep all my blood-related health information and make it "actionable", with the backing of James Mattis, William Perry and none other than Henry Kissinger. There are more soldiers in that board there than doctors. The only way I'd give them my blood would be to infect them with a disease.
> Wow. She must be a pretty amazing woman to have collected such strong allies. I'd have lunch with her.
[This last one was downvoted, but is probably the sort of reaction Theranos was hoping to engineer.]
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Wirecard has been accused before of fraud by so called "short sellers". The document published (2 years ago?) showed a tremendous, extraordinary complex network of international corporations. Such complex setups have a very limited purpose. It can basically be only tax "optimization", hide fraud or hide ownership (UBO). After having seen this PDF I would not touch the Wirecard stock.
By the way, I think Alibaba is opening two new corporations. Per day. You may also want to read at Bronte Capital about Alibaba.
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"the company is worth ZERO in my opinion)"
This IS a possibility. But the stockmarket exaggerates always in both directions, "like a sausage dog on a leash, sometimes walks in front of you, sometimes behind you but always comes back to you" Kostalany
If you want to make a gamble there could be buying prices now or soon. But it stays a gamble.
"Even a good company can be too expensive" Buffet
"Even a shitty company can be cheap" me
I suspect that Alex in the daily telegraph will be commenting on this shortly.
> On Monday, BaFin banned further short selling of shares in Wirecard, the Dax-listed payments services group. The stock has dropped steeply after FT reports raised questions over the validity of accounts. The German financial regulator said its first ever ban on shorting a single stock was needed to prevent a loss of confidence in financial markets.
https://www.ft.com/content/f04793df-43a2-4d69-a39f-e04dac36c... has the full details (but paywall)
A company that understands it's in such a position is, IMO, more likely to misbehave because they know the odds of there being consequences are much lower.
Edit: The problem is that companies get to pick their auditors. Since the auditors sell a homogenous product (it doesnt really matter, who signs off you yearly report), the only way the big four accounting firms can compete is by being cheaper and/or more "favourable" to the customer. Both not that great for the customer (which actually should be the shareholders and in reality its mostly the board).
* even a pretty obvious fraud can go on much longer than one would think if the organizers are ruthless enough. My original short position would have gone against me 25x over 12 years and the share price even after today’s disaster would be higher than back in 2008 (just to be clear: the company is worth ZERO in my opinion)
* a company that goes against people who write negative articles as aggressively as Wirecard has something to hide
* if the profitability of a business can not be explained by its business model, then most likely something is very wrong (greetings Bernie Madoff)
* 99% of professional investors and analysts don’t care about these things even if you tell them. A lot of people knew that the company was fishy but hey thought they can make money anyway and a lot of people made a lot of money over the years
* Small companies with far flung operations in difficult geographies should be avoided (see Globo Plc) as this makes fraud difficult to detect for auditors
* A big 4 Audit firm is no proof of quality.