Adyen: a 50% drop in three days!
24 August 2023
Adyen, the flagship of the European tech sector, which entered the STOXX 50 with great fanfare three years ago, has lost half its market capitalisation in the space of a few days.
After the drop, we have a €24bn capi.
Question 1: Why the drop? I've read a few unconvincing comments. What is certain, however, is that given Adyen's valuation levels before the fall, what happened had to be one of the possible scenarios. The multiple was around 30x sales (!). The right image is the equivalent of driving at 280km/h on the motorway: the slightest unforeseen event can turn into a tragedy.
Question 2: is now the time to get in? Most commentators explain that the fall in the share price is due to the continuing increase in recruitment, which is weighing on margins. But if I were an Adyen shareholder, it's the opposite that would scare me: in the first half of the year, the group's total payroll amounted to €250m. That's not much to maintain and develop a tech solution in the difficult field of payment. Block, one of Adyen's competitors, put around 4x as much money on the table over the same period. The other competitors, Paypal and Apple, have even greater resources at their disposal.
I don't know the sector well and I don't know the title well. But I do know that there is risk involved (see Lending Club, Wirecard) and that, as Audiard said, "When 130-kilo guys say something, 60-kilo guys listen". And Adyen, given its means, is well in the "60 kilos" category but is boxing with "130 kilos". (The business world is a mess, we should ask Don King to draw up a fairer set of rules).
Conclusion: No, we won't be returning Adyen to Monocle today.
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