Worldline Loses It Disguise

Halloween has come and gone. As usual, it was less scary than it was sweet.

But what happened to Worldline was very scary and certainly not sweet.

On 25 October, the French payment provider’s stock plummeted nearly 60% after it reported weaker than expected earnings. The steep decline was sparked by growing fears that companies like Worldline, whose business is inherently driven by consumption, will suffer mightily in the near future.

Source: TradingView

As a leading payment processor and financial intermediary, Worldline relies heavily on transaction volumes and consumer spending. Since the covid pandemic, the consumer - both European and American - has proven resilient. With gloom now settling over the economic outlook, the dramatic drop in Worldline's share price signals rough seas ahead.

There is a deeper lesson, however.

“When the going gets tough, the incentive to “cut out the middle man” grows.”

Whereas cheap money made it easy to ignore the many hungry sharks sitting between manufacturers and consumers, harder times shine a hot spotlight on all the grubby hands that try to take a cut along the way.

Worldline’s business - as extensive and sophisticated as it might be - is wholly predicated on the intermediary model. Stripe, the wildly popular American payment provider, is also a financial intermediary.

The difference is that Worldline is a bloated corporate entity built in the best imitation of the French state. Its scale and size have protected it up until now. But corporate fat and red tape are a poor disguise for a company that does many of the same things as Stripe - at a much higher cost.

When investors ditched Worldline stock, they were sending a clear signal.

“The mask has fallen off.”