The new British boss of Wefox, one in every of Europe’s greatest insurance coverage know-how corporations, has warned traders that it may face collapse inside months because it contends with a slew of regulatory and monetary challenges.
Sky News has learnt that Wefox believes it may grow to be bancrupt by the summer season except it may well safe the sale of numerous its loss-making operations.
The parlous state of the corporate, which was valued at $4.5bn (£3.6bn) in a funding spherical lower than two years in the past and whose lenders embody Barclays and JP Morgan, makes it the most recent large of Europe’s tech scene to face an existential disaster.
In a memo circulated to shareholders earlier this month – particulars of which have been obtained by Sky News – Wefox’s new government chairman and chief government, Mark Hartigan outlined a bleak state of affairs wherein its holding firm “becomes insolvent in August, or potentially even earlier”.
Mr Hartigan, former boss of the UK-based insurance coverage mutual and pleasant society LV=, mentioned that the corporate was engaged in pressing discussions geared toward stemming losses in its Italian unit, in addition to closing operations in Germany, promoting a part of its enterprise in Poland and unwinding a three way partnership in Switzerland.
He warned them: “My key deduction is that Italy has been running on systematically false operating assumptions…and is now insolvent without ongoing Group cash support.”
Mr Hartigan additionally instructed traders that its liabilities in Germany had been “very significant and could introduce a large cash strain on the company”.
Wefox is backed by among the world’s largest tech traders, together with the Abu Dhabi sovereign wealth fund Mubadala, Canada’s Omers Ventures, Target Global and G Squared.
Its British-based shareholders embody Chrysalis Investments, the London-listed fund which final month wrote down the worth of its stake in Wefox by a 3rd.
Founded in 2015, Wefox sells insurance coverage merchandise by way of in-house and exterior insurance coverage brokers, and has continuously boasted of its ambition of revolutionising the insurance coverage trade by way of the usage of know-how.
It has practically 3m prospects throughout its enterprise.
Mr Hartigan took on his new government position from Julian Teickle, one of many firm’s co-founders, who mentioned in a public announcement in March that his transition to grow to be president would permit him to “dedicate more time and energy to my big passion: supporting founders in building up their own ventures”.
In his memo to Wefox traders, Mr Hartigan cited the progress of its restructuring efforts as providing a glimmer of hope to traders {that a} sustainable reshaped group may emerge from the method.
“The opportunity to rebuild through restructuring and any optionality for the future remains dependent upon reaching [a] sustainable position by balancing cashflows with the timing of our planned disposals,” he wrote.
“The increasing demands on Group cash from country demands to stay solvent, from the Regulatory requirements for upfront carrier capital, from business disruption from increased media leading to partner uncertainty, from the control of cash and increased costs related to the [Revolving Credit Facility], leads me to remain very concerned that this balance will be disrupted.”
Mr Hartigan can be reducing jobs in central features, having shed 60 roles in latest weeks, with extra anticipated to observe.
In July 2022, Wefox raised a $400m Series D funding spherical valuing it at $4.5bn, making it one of many largest fintechs in Europe.
That adopted a $650m spherical in May 2021 valuing it at $3bn, reflecting the frothy urge for food of traders to again scale-ups thought to be having the potential to grow to be international rivals of real scale.
It then secured an additional $55m in fairness financing and the identical quantity in debt funding from Barclays and JP Morgan a 12 months in the past.
Responding to an enquiry from Sky News, Wefox refused to reply questions on its insolvency warning to shareholders, saying: “Wefox does not comment on rumours or speculation.
“As a basic assertion, we reiterate what we now have mentioned when Mark Hartigan took over as CEO on March 6.
“Supported by the board of directors, in which the most important investors are represented, and together with the current management team, he will lead the company through the next phase of development.
“Following the fast development of latest years, this can even contain a consolidation and focus of Wefox’s worldwide actions.”
The spokesman added: “The simplification of our business model will allow us to save costs and will provide us with the financial flexibility to continue pursuing our ambition of making insurance distribution smarter, more effective, and more efficient through technology.”
Content Source: information.sky.com