Mutares SE & Co. KGaA – Research Report
- Gotham City Research LLC
- Sep 26, 2024
- 2 min read
CONFLICT OF INTEREST: At the time of publication of this Report, GOTHAM CITY RESEARCH LLC, General Industrial Partners LLP, and their affiliates, in aggregate, hold short positions corresponding to 1.094% (233,556 shares) of the total issued share capital as of September 25, 2024 in the issuer mentioned in this Report and stand to profit in the event the issuer’s stock declines which may occur as early as the Report is published or at any later point in time. Thus, while GOTHAM CITY RESEARCH LLC and General Industrial Partners LLP have made every effort to present the information contained in the Report in an objective manner, the reader of the Report must bear in mind that GOTHAM CITY RESEARCH LLC’s and General Industrial Partners LLP’s interest and that of its affiliates is to see the price of the issuer’s stock decline.
GOTHAM CITY RESEARCH LLC and General Industrial Partners LLP and its affiliates may take additional positions in the issuer (both long and short) at a future date and disclaim any obligation to notify the market of any such changes except to the extent that it is legally required.
Mutares SE & Co. KGaA – Another attempt at a failed premise, but with an accounting irregularity, and a circular twist
SUMMARY OF FACTS AND OPINIONS
The H1 2024 balance sheet’s EUR 394.2mln reported cash position does not match the H1 2024 statement of cash flows’ EUR 422.2mln reported cash position.
Mutares Holdings’ Receivables from portfolio companies grew EUR 288mn in 2019-2023, more than the EUR 282mn of cumulative HoldCo net income in that period. This appears circular to us, especially since we estimate that Mutares Holding burned EUR -52mn of cash from 2019-2023.
Mutares appears increasingly reliant on debt, as MUX has increased from low levels of debt before 2020, to EUR 150mn in debt by year-end 2023, and adding an additional EUR 235mn thus far this year!
Mutares reminds us of Aurelius in 2017 (when we issued our 1st report), except that Mutares may have less room for error, as it is currently in a net debt position, whereas Aurelius was in a net cash position in 2017.
QUESTION: Are existing investors paid with funds collected from new investors?
FULL REPORT
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This is a fascinating and well-structured report — the cash position discrepancy between the balance sheet and cash flow statement alone raises serious red flags for any serious investor. The comparison to Aurelius in 2017 is particularly telling, especially given Mutares' current net debt position leaves far less margin for error. What strikes me most is how corporate governance and financial transparency are deeply interconnected — much like how studying Tesco HRM practices reveals how internal accountability structures either strengthen or erode stakeholder trust over time. When receivables grow faster than net income and debt levels keep climbing, it suggests a business model under strain rather than one compounding value. For students and professionals looking to critically analyse such complex…
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