Worldline's $3.8B Wipeout: Wake-Up Call for EU Fintechs

Worldline’s $3.8B Wipeout: Wake-Up Call for EU Fintechs

Time Stamp: October 26, 2023 4:12 AM
Source Node: 2960541

The leading French-based payment processor Worldline, has sent ripples of concern through Europe's fintech sector by cutting its sales outlook. The announcement led to a drop of more than 50% in the company's stock, erasing €3.8 billion from its market value and reducing it to around €2.7 billion. This comes amid increasing skepticism from investors about the fintech industry's sustainability, especially in Europe.

At first glance, Worldline's report looks good. The company announced that revenue reached €1.18 billion, translating to an organic growth of 4.8% compared to Q3 2022. The growth was primarily driven by its "Merchant Services" segment, which saw an increase of nearly 8% to €868 million.

However, Worldline also noted a macroeconomic deterioration in some of its core regions and the termination of some important relationships. Worldline's announcement specifically highlighted challenges in the German market and rising risks of fraud and cybercrime.

These issues have forced the company to sever ties with some clients, impacting its growth and profitability. Earlier this year, the German financial watchdog Bafin had imposed severe restrictions on a Worldline subsidiary for failing to prevent credit card fraud. As a result, the company expects to lose as much as €130 million in revenue.

"The scope of such online merchants could represent a maximum of c. € 130 million in run rate 2023 revenues, of which c.€ 30 million impacting H2 2023 and c. € 100 million mostly in H1 2024 impacting comparison basis," the company commented in the official press release.

As a result of the release of negative news, Worldline's shares on the Paris stock exchange lost nearly 60% on Wednesday, falling to historically low levels. On Thursday morning, they briefly deepened these lows, testing €9.01 per share.

Broader Problems of the Fintech Sector in the EU

Just a day before Worldline dropped its negative news, the UK-based CAB Payments Plc had seen its share price fall 72% after revising its revenue guidance downward. In August, Adyen NV faced a selloff after disappointing results from the first half year. These incidents have led to a growing sense of unease among investors, who are increasingly impatient with European fintech companies.

According to KPMG's Pulse of Fintech report, funding in the second half of 2022 was $63.2 billion across 2,885 transactions, but it fell to $52.4 billion across 2,153 transactions in the first half of 2023. This indicates a considerable reduction in both funding and the number of deals.

As the industry grapples with these challenges, there's a noticeable shift towards focusing on long-term sustainability and profitability. A recent report by Finch Capital revealed that the European fintech sector raised €4.6 billion in the first half of 2023, a significant drop from €15.3 billion in the same period last year.

Source: Finch Capital

While seed-stage companies continue to attract investment, those in the Series A to C stages are most affected. The payments sector, usually robust, has seen a decline, whereas cryptocurrency and blockchain companies are gaining more investments in the early stages.

The leading French-based payment processor Worldline, has sent ripples of concern through Europe's fintech sector by cutting its sales outlook. The announcement led to a drop of more than 50% in the company's stock, erasing €3.8 billion from its market value and reducing it to around €2.7 billion. This comes amid increasing skepticism from investors about the fintech industry's sustainability, especially in Europe.

At first glance, Worldline's report looks good. The company announced that revenue reached €1.18 billion, translating to an organic growth of 4.8% compared to Q3 2022. The growth was primarily driven by its "Merchant Services" segment, which saw an increase of nearly 8% to €868 million.

However, Worldline also noted a macroeconomic deterioration in some of its core regions and the termination of some important relationships. Worldline's announcement specifically highlighted challenges in the German market and rising risks of fraud and cybercrime.

These issues have forced the company to sever ties with some clients, impacting its growth and profitability. Earlier this year, the German financial watchdog Bafin had imposed severe restrictions on a Worldline subsidiary for failing to prevent credit card fraud. As a result, the company expects to lose as much as €130 million in revenue.

"The scope of such online merchants could represent a maximum of c. € 130 million in run rate 2023 revenues, of which c.€ 30 million impacting H2 2023 and c. € 100 million mostly in H1 2024 impacting comparison basis," the company commented in the official press release.

As a result of the release of negative news, Worldline's shares on the Paris stock exchange lost nearly 60% on Wednesday, falling to historically low levels. On Thursday morning, they briefly deepened these lows, testing €9.01 per share.

Broader Problems of the Fintech Sector in the EU

Just a day before Worldline dropped its negative news, the UK-based CAB Payments Plc had seen its share price fall 72% after revising its revenue guidance downward. In August, Adyen NV faced a selloff after disappointing results from the first half year. These incidents have led to a growing sense of unease among investors, who are increasingly impatient with European fintech companies.

According to KPMG's Pulse of Fintech report, funding in the second half of 2022 was $63.2 billion across 2,885 transactions, but it fell to $52.4 billion across 2,153 transactions in the first half of 2023. This indicates a considerable reduction in both funding and the number of deals.

As the industry grapples with these challenges, there's a noticeable shift towards focusing on long-term sustainability and profitability. A recent report by Finch Capital revealed that the European fintech sector raised €4.6 billion in the first half of 2023, a significant drop from €15.3 billion in the same period last year.

Source: Finch Capital

While seed-stage companies continue to attract investment, those in the Series A to C stages are most affected. The payments sector, usually robust, has seen a decline, whereas cryptocurrency and blockchain companies are gaining more investments in the early stages.

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