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whats up with Wowwo? Discounts reaching new highs on secondary market

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  • Official comment
    Permanently deleted user
    Community manager

    Feel free to post your Q&A regarding Wowwo and follow the latest updates in this thread:

    Click here> Wowwo Q&A

     

     

    UPDATE FROM 28.01.2022

    Dear Investors,

    On Thursday, 27 January 2022, we had a meeting with Wowwo to further discuss possible solutions to the case of Wowwo's borrowers' repayments not being transferred to investors on Mintos. In the meantime, the funds due by Wowwo to Mintos and investors are moved to funds in recovery. The API communication system between Wowwo and Mintos was disconnected by the Turkish lending company due to currency risk that materialized for Wowwo as Lira continued to lose value against Euro.

    In the most recent meeting, we exchanged information and proposals with the management of Wowwo, and we are planning to have a follow-up meeting next week when we will further discuss proposed options which will in the meantime be evaluated by both parties.

    Mintos negotiations team is fully focused on coming to a resolution that will disrupt investors the least, as the case is currently classified “Stage 3”. You can find more about what this means in the article here: 

    https://www.mintos.com/blog/how-we-deal-with-loan-originator-issues-and-recovery-of-investor-funds/

    As soon as we reach conclusions of value for investors and that can be publicly shared without disrupting our negotiation position, we won’t hesitate to update you immediately. In any case, we will share a more detailed follow-up after the upcoming meeting with Wowwo. 

    Best Regards,

    Mintos

     

     

    5.01.2022

    Hello everyone!

    Thank you for sharing your comments and questions.

    We understand that the materialized currency risk has affected your portfolio and that currently, your expected gains from investments in loans by the Turkish lending company Wowwo are on pause due to interruption in the repayments flow.

    In our Mintos Risk Score, we express the results of the evaluation we make based on different criteria related to the business of the company whose loans are placed on the marketplace. In 2021, Wowwo’s business was stable, payment flows were uninterrupted. We addressed this in the follow-up email we sent to investors on Wednesday, wrapping up our meeting with Wowwo. If you missed getting this letter to your email, please let us know via chat so we can look into the issue.

    We provide results of our evaluation of the companies, but we always encourage investors to do their own due diligence, as only individually, an investor can evaluate the risks they’re willing to take when it comes to economic dynamics related to specific markets. We are not able to give forecasts of macroeconomic tendencies or political and social threats and opportunities in different regions and geographies. All our monitoring is the result of the hard work of the professionals on our risk team, nevertheless, none of it should be considered as investment advice, as we’re not allowed or invited to give those. That’s why we continually encourage investors to evaluate their own appetite based on their own risk assessments, and this turns out to be very useful in cases involving macroeconomic risks.

    Since we’re in the process of negotiations, we hope you understand that sharing any vague promises does not work in the interest of the possible upcoming solutions to this case. We will share any firmly grounded information on the new developments with Wowwo as soon as we reach a mutual agreement with this company.

    Thank you so much for your trust so far.

  • Gelfiya Shchienko

    Dear Mintos team,

    I want to go back to the original question in this tread - if you were monitoring and were seeing issues with Wowwo and Turkish market since September, how come their rating was not adjusted? Moving from 7 - the second highest ranking (in reality, there are no 9s or 10s) to Suspended overnight in the middle of December is hard to explain, but important to maintain credibility of your internal controls and risk management practices in scoring.

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  • Dimitri Jacques T De Marneffe

    Dear Mintos Team,

    Some other questions, in complement to those raised by Gelfiya Schienko and other participants to this thread:

    - Why were no Wowwo delays reported in the weekly pending payments updates (while I now see that no Wowwo payments were made on my account since the beginning of December at least, although some were effectively due and have more than 2-3 weeks of delay)?

    - It is indeed a bit shocking that some investors have seen the Turkish Lira issue (which cause this flood of sales on the secondary market), while Mintos did not raise the issue at any time, especially when we now see that there were already delays in payments by Wowwo. Don't you see this as part of your role as market organizer? And as issuer of the risk scores?

    Thanks in advance for your answers on this.

    Dimitri  

    4
  • Flo

    Gelfiya Shchienko and Dimitri Jacques T De Marneffe

    you make very good points! I found out that mintos was not publishing the already overdue payments of Wowwo when it was already too late. At the latest in the report which was published on December 10th (maybe even one week before that) there should have been a substantial amount by Wowwo but the report does not show it. I don't know if this was with bad intent but at least it was negligence which cannot be overlooked when we talk about a total of nearly 18 million Euro invested in this company.

    In their original statment / email regarding the suspension of Wowwo Mintos claims:

    "There is currently no indication that the borrowers’ ability to repay their loans has been impacted."

    While Wowwo has not paid up for nearly a month at this point.... really???

    I asked through Mintos chat on December 17th why the delayed payment reports did not contain this important information and also why they made this statement in their blog post/email, but did not get an answer right away. Today Marek from Mintos team sent me a copy/paste answer that it is not in the report from December 17th because the status was moved to suspended totally ignoring the question about the reports in the weeks before that. I am not sure what to think of this, but I does not seem like they care at all.

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  • Azeg

    I think the issue here is bigger than Wowwo itself:

    1. Wowwo was marketed as a relatively safe investment option

    2. Accordingly, if you use Conservative Mintos Strategy then your money can go to them

    3. It turns out, they were not safe at all for the country and currency risk were not weighed when they got a score of 7. Mintos focused only on the company itself ignoring the external country factors around the company.

    Similar situation with Russia. They are preparing to go war with Ukraine and still if you go with Conservative strategy, Mintos will invest money into Russian or Ukrainan loans not considering significant macro risks. Furthermore, you have no option to turn those countries off when you want to use "trusted and reviewed" Mintos Strategies. 

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  • Flo

    Regarding the recent email by Mintos:

    @Mintos: Please answer the questions by Dennis and Rodrigo Valle Teixeira

    Besides this: the way the email is written makes it feel as we have to friendly ask and hope that Wowwo will kindly repay it's debt. Seriously? Unless the contract is not worth the paper it is written on: If indeed Wowwo has solid reserves get the money while it is still there by legal action.

    3
  • Jeff

    Since I was buying loans denominated in EUR, I expected that those are EUR loans. Mintos platform did not supply valid/useful information about the fact that loans are issued in TRY. I would never invest in such conditions!
    Individual investment agreement (pdf) is also in EUR, just there is once sentence stating "Currency used in the Sales Agreement: TRY". This should have been clearly disclosed, but Mintos doesn't give a sh*t about investors' interest, the only thing they really care is getting fees from LO and Investors. One more reason for leaving this platform.

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  • emay

    the problem here is not (only) with the borrowers but with wowwo itself. Wowwo's customers, if they are not too impacted by the fall of the lira themselves, are actually doing well as the super high inflation (>50%) is devaluing their loans making them worth less an less. The issue is that wowwo financed these loans in Euro and have to pay back the money in Euro while customers are paying back in super depreciated Liras. Wowwo has to cover for the shortfalls. If the Lira recovers quickly this might not be a big issue as some depreciation against the EURO was surely accounted for by wowoo. However if it does not recover and if wowwo did not hedge its debt against the currency risk then it is possible that it will go bankrupt, even if its customers keep on paying.

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  • Juergen Karl Schreier

    emay

    Your perfectly right and I agree with most that you said.

    But I want to emphasize that Mintos is and HAS to be criticized for

    a) Their scoring system - because it is useless at best - my highest losses have occured the topmost LO grades. And to add insult to injury everytime shortly after an upgrade ( i.e. varks Armenia, Finko UA, CS, Poland, Woowow)

    b) That their strategies - even when using a conservative one - do pretty arbitrary distribution of monies. I even came to the conclusion after analysing where freshly added money was invested - that there could be some sort of compensation to Mintos by LO if they qet their respective loans filled quickly - because better (in the sense of better for the investor i.e. more interest and/or safer) opportunities were necglected.

    c) Mintos also needs to be critized ALOT for punishing investors more than the LOs by their suspensions of the loans. I feel it would be fair to let investors sell risky/endangered loans with a discount on the secondary market and just suspend the LO from offering new loans on primary market.

    They even could mark those loans with a "high risk" marker so everybody knows. Then the investor is not illiquid and on pardon of Mintos and how successful they are in recovering money (which they are not - at least in my cases).

    Finally I view it as a great problem that with these proceedings I cannot decided when to call it quits, swallow a loss and move on. I also cannot write down my obvious losses from tax and have to pay income tax on earnings that are 25% of my on paper losses.

    So all in all Mintos is not behaving investor friendly but LO friendly. And I feel this should be known to investors so that they can make an educated decision before investing.
    I personally would have never invested on Mintos - had I known all these things beforehand.
    Back in the day all was great, and we had a buyback guarantee (until it was needed then we learned differently). 

    After all this is known I would prefer not to be invested beause the risk/reward relation is just not worth it considering the stock market is alot more profitable, transparent and better regulated. Also the trading plattforms are more mature their alignment to investor interests is not as disproportinate as here. 

    Merry Christmas to all and the best wishes for a peaceful and profitable 2022

     

    Jürgen

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  • Dennis

    Recent update:

    Influenced by materialized currency risks resulting in accumulated FX loss and with the possibility of further FX losses if Lira continues to plummet, Wowwo’s management decided to freeze the transfers of borrowers' payments to the Mintos investors. During our conversations, Wowwo’s team proposed an agreement about loss management that we don’t find satisfying for Mintos and investors in Wowwo-issued loans.

    We will continue negotiations with Wowwo to find a solution to this case, that’s in the best interest of investors on Mintos and our company.

    Can someone explain to me how it is possible that an LO can just decide to freeze payments? is there no legal obligation to forward payments? Why are negotiations necessary.. 

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  • Rodrigo Valle Teixeira

    This is getting absurd.... The sentence "Wowwo’s team proposed an agreement about loss management that we don’t find satisfying for Mintos and investors" should be followed by "so we initiated legal action"!! What is Mintos waiting for?

    2
  • Jose Lopez

    Hi all, 

    Just a bit confused about the last press releases from Mintos regarding the Wowwo Issue - I have got one question RE FX risks (and this is a good example of it), and who bears this risk. As many of you have already said, I initially applied the Mintos' conservative strategy, presumably thinking that Mintos' scores also included in-country risks (I was wrong). Now I am aware that Mintos' scoring is totally useless, their conservative algorithm invested 10% of my portfolio in Wowwo, a single LO in Turkey (different currency than EUR), and a big chunk of my remaining portfolio is invested in exotic economies with also different currencies than EUR. What does the word "conservative" mean to Mintos? If FX risks are fully born by investors, this platform lacks from more transparency and clarity around the underlying risks beyond their scoring. Thanks.     

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  • Dennis

    Martins Sulte (Mintos) @... Mintos Marketing

    Could Mintos please implement learnings from previous problems with LO's. And communicate with their investors in a more transparent and active way? Is see multiple threads and questions, though the latest activity on the community from mintos regarding this subject is 10 days old.  

    2
  • Flo

    Seems like it is official now that we will suffer a significant loss on our Wowwo investments...

    @Mintos another perfect example of a failed communication strategy...

    From todays blog post: https://www.mintos.com/blog/mintos-2021-year-in-review/

    Well played.....

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  • Jeff

    Dennis, you don't have to agree, but the reality is that consumers in non-EUR countries take loans in EUR. You can see Moldavian/Romanian/Russian loans that are entirely in EUR. The problem is that Mintos presented the Wowwo loans as EUR loans and hasn't even reflected the FX risk in its own ratings.

     

     

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  • Jose Lopez

    As a conclusion to my previous message, we as investors have an agreement with Mintos, and Mintos subsequently have got their corresponding agreements with the LOs, which are disclosed to us. The point is that nominally you are lending EUR. In the case that EUR is cheaper to TRY at the time of the payback, this is clearly an upside for the LO, they have got an extra margin upon their forecasted profit and that's fair. If the EUR is more expensive to TRY, this is the opposite, this is a downside. These are market rules that have to be clearly shown in Mintos platforms, and Mintos cannot transfer these risks back-to-back to investors, LOs have to be enforced to hedge these risks to operate within the platform. Otherwise, Mintos is not playing an adequate role, regulating this market, there will be more and more LOs that will take advantage of declaring themselves as defaulted with no consequence. The thing is THAT is NOT clearly caveated at the time being, and this is a risk that EUR investors MUST NOT BEAR under no circumnstances. This is not a fair play.

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  • MOFI

    This goes to show that the R/R ratio is vastly underestimated. The ONLY default i will accept is if the LO defaults aswell. This whole situation is absurd.
    But i think we are speculating worst case scenarios here. In reality i hope the contract between mintos and LO is solid enough to be enforced by law. Late fees with interest. As long as they (wowwo) have any assets.
    And the frozen payments are accumulating interest.
    These are default rules

    2
  • Claus

    It could be that investors are concerned by the development of the Turkish Lira. In the last weeks the value of the Turkish Lira decreased rapidly which raises the issue if Wowwo can still pay back the loans.
    https://www.finanzen.net/devisen/euro-tuerkische_lira/chart

    1
  • Rodrigo Valle Teixeira

    Mintos, So what will happen with the existing Wowwo loans? Are you waiting for the 60-day limit? Then what?

    1
  • Juergen Karl Schreier

    I can only recommend to NOT use Mintos prepared strategies but decide and select all by yourself.

    Whenever I used those strategies a big part of the invested money went into questionable LOs and countries.

    With the result that I am sitting on a total of 2,2+ TEUR of funds in recovery with little hope to get anything back.

    To round out the picture: I once had aroud 12 TEUR invested in Mintos and have also made so money off of it (around 0,7 TEUR).

    BUT if you discount the risks that are obvious as well as the behaviuor fo Mintos (which is NOT investor aligned but LO aligned - since that is where their money is made) then an investment in Mintos is alot riskier than an investment in i.e. the stockmarket or maybe even crypto while having less total return opportunities.

     

    1
  • Pi

    If you look at the statistics about car loans by wowwo , current loans are 4M from 19M outstanding. I do not see how if 70% of the portfolio is overdue, we can expect anything but a default and basically huge loss. Btw, the problem with issuing loans in different currencies for the investor and the actual borrowers, are huge risk and I do not see how Mintos can do reasonable currency hedging - it requires finance expertise and instruments that has nothing to do with p20 lending

    1
  • emay

    I am not sure how much we can trust the overdue statistics (as many other mintos stats). Most likely wowwo is delaying any payment to mitos now hopeing for the lira to recover. If they pay now they would incurr in an immediate loss. Regarding hedging: I agree this is not mintos job. However mintos could check that the lender has a reasonable hedging strategy in place when assigning lender scores. That said, hedging against volatile currencies can be very expensive and by all means mintos users bear some risk irrespective if the loan is in euro or local currency.

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  • Pi

    There is no such thing as Mintos performance , it is LO performance that creates your 9% - when you lose 10% of your portfolio and see that you need a year just to break even, maybe you’ll say more than “meh”

    1
  • Flo

    Rodrigo Valle Teixeira I would rather see this thread stay on topic so please open a new thread for discussions about your personal expierence with different investments or overall portfolio diversification. It's interesting but has not that much to do with this topic - thank you!

    Besides this the scenario you are painting with 10% of a portfolio (I guess you a refering to a scenario where 10% is currently stuck with Wowwo) is breaking even after a year is kinda positive (not saying it ain't gonna happen). Good for you you never had to write off investemts here on Mintos but there are plenty of us who had to. There are also scenarios where we loose 50-70% of this investments or even a total loss could be possible (which is very unlikely but still could happen in case there a loopholes in the contract that allows Wowwo to weasel out without paying anything).

    Anyway let's hope for the best and that Mintos is provding an update soon! Happy holidays guys!

     

    1
  • Pi

    just to mark the moment that the statistics ( that somebody here said we may not trust - ?!!?!? ) of wowwo loans changes as expected - now less 2M of 19M are current loans. and the TRL/EUR rebound of almost 50% last week, is quickly being bounced back ( maybe more quickly than expected ), so things are definitely going from bad to worse/worst... in my portfolio, less than 5% of my wowwo loans, are current.
    still, loans are due over many months ( and even years ), and car loans obviously have collateral as the car itself, so maybe things can be at least mitigated for investors ...
    so, interesting times ahead of us, the investors...
    happy holidays to all

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  • emay

    My guess is that Wowwo has stopped transferring any information on loan repayments. All loans with passed payment dates are marked as late but, if the borrowers are still paying, they should be marked as pending payment. In this case Wowwo should also pay 1% interest on payments pending more than 10 days. Not that this matters much if all the principal is at risk.

    If Wowwo has the money they are probably just trying to reduce the losses by negotiating or by delaying the payment until the lira recovers. This is clearly a very risky move as the lira might plunge even further.

    Beside this it is clear that currency risk is one of the main factors of risk associated to a LO. It is disappointing that this is not mentioned anywhere in Mintos rating system.

    1
  • Jose Lopez

    Fully agree with Jeff's points, in Mintos you can pick the currency you invest in, either EUR or other exotic currencies. Many of us invest in EUR loans, loans in which there is NOT an explicit FX risk for the investor, you lend EUR, you are paid back in EUR. End of the story. This is a key point to be factored, as oppositely there are other loans in which there IS a FX risk for the investor, they are supposely investing in a currency different than EUR, and exchange rates may evolve over time. This is NOT the case, and this issue is a trigger for many of us to remain using Mintos. The other way round, what is the difference of investing in local currencies or in EUR? The response, to me, is WHO contractually bears the FX risks, and this should be highlighted. Investors with nominal EUR loans are not expected to bear FX risks, LO are. That is the point.

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  • Dennis

    Hi @...

    Thank you for reaching out. For me; I have no doubt that Mintos will do its out most best to getting the results without litigation were possible. 

    Could Mintos present answers on multiple questions raised on the community regarding this matter, that are not regarding the negations with Wowwo. These questions can take away some some uncertainty that made me and others pull out for the time being. I will sum them up for your convenience:

    1. If Mintos was monitoring and were seeing issues with Wowwo and Turkish market since September, how come their rating was not adjusted earlier? and why were no Wowwo delays reported in the weekly pending payments updates
    2. Does Mintos know wich LO's hedge there currency risk, Does Mintos obligate them to hedge and how can investors know if this is the case. (hence how can i check my FX risks)
    3. Is it correct that auto invest and risk score do not take in account macro, economic risk etc. but solely the performance of the LO it self?
    4.  Will Mintos evaluate their current Risk score methods and strategies?
    5. Individual investment agreement (pdf) is in EUR, there is just once sentence stating "Currency used in the Sales Agreement: TRY". Does Mintos agree that improvement  to these FX Risk should become more clearly for investors? 

    I would be much more comfortable is above questions were answered.  

    Warm regards,

    Dennis

    1
  • Oliver

    As far as I understood it the currency risk IS with the LO - they borrowed EUR, they repay EUR. However it seems that they are unwilling to do so (not unable so far), given their reserves and the current situation. So if this were a bond they'd technically be in default, regardless why they failed to pay. And the risk of LOs failing to pay due to their currency risk is subsumed in counter party risk, which is born out by the investor. It's unfortunately the case that any risk born by the LO is indirectly transfered to the investor through counter party risk in the end.

    However litigation would take time and require someone else to do the collections from the actual borrowers (who have contracts in Lira) in case the litigation kills off the LO (which seems possible). All of this would also take money to enforce. Given all that it's likely the best approach for Mintos to look for a negotiated solution at first. Once concrete offers are on the table those will be communicated and people asked on how they want to proceed (as was the case with other LOs - the final result with Capital Service was better than what they were offering intially).

    However I also want to know in time, what Mintos has learned from this case and how those Lessons Learned are being applied to improve the handling of similar situations in the future (basically answers to the question by Dennis).

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  • Dennis

    Hi @...,

    In your previous comment and in recent blog post you keep referring to ''less educated investors''. However we have not received any answers on multiple questions on this community fora, which I summarized 4 days ago. We are still awaiting patiently. Answering these questions shouldn't conflict any current negotiations. And it might help to educate us... @Undis (Mintos)

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