Multitude as an investment

Stocks
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A majority stake was acquired in Sortter. Roni, do you think this fits the big picture, and what kind of fintech entity is actually being formed here? How should an investor view this? Is it a payday lender, a bank, a fintech, etc.???

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This move wasn’t particularly surprising, as it was known that the company had the option to increase its ownership after three years of holding (first investment made in 2021). The exact ownership percentage and purchase price were not provided in the press release, which limits the ability to assess the sensibility of the deal. However, Sortter’s development has been strong and it seems like a good company in its own right. I will need to ask the company more specifically tomorrow in connection with the results about the operating model going forward with Sortter and what synergies are being sought. But indeed, it’s an interesting setup for a lender to also own a comparison platform. The company likely gains valuable data on competitive dynamics, and they capture at least a slice of the value even if the end-user chooses another lender’s loan. In a sense, this diversification of income is also represented by the Lea Bank ownership, through which the company gets more exposure to prime loans.

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Here are Roni’s comments as Multitude increases its ownership in Sortter :slight_smile:

Multitude announced yesterday that it has signed an agreement to acquire a majority stake in the Finnish financial services comparison platform Sortter Oy. Multitude previously held a 19.97% minority stake in the company, which it acquired in 2023. Sortter’s growth history has been impressive in recent years, and the business also turned profitable last year. Multitude had an option to increase its stake after three years of ownership, so the increase in ownership did not come as a surprise. Since Sortter is a profitable company, the increased ownership places some upward pressure on our earnings forecasts. Multitude presents its Q1 report today, and we aim to obtain further information during the day.

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Here are Roni’s quick comments on Multitude’s Q1 results :slight_smile:

Multitude’s revenue developed in line with our forecasts, but the result fell short of our expectations due to a higher cost structure. The guidance (EUR 30 million net profit) was reiterated, but after a softer-than-expected Q1, we see the guidance’s margin of safety as low. However, we believe it is worth noting that the acquisition of a majority stake in Sortter helps in achieving the guidance. You can follow the company’s webcast here.

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Here is the company report on Multitude from Roni following Q1 :slight_smile:

Multitude’s Q1 results fell short of our forecasts, although the company reiterated its full-year guidance. There are clear profitability drivers for the remainder of the year, but we see a limited margin of safety in the guidance. Sortter continues to support the earnings outlook and strengthens the growth story. As the valuation remains very low, we reiterate our Buy recommendation and our target price of EUR 7.8.

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I am currently filing for a correction on the “excessive” withholding taxes on Multitude dividends. I would love to hear about others’ experiences if you have tackled these before, and of course, I can potentially provide some tips for those who have this process ahead of them. The Swiss taxman withholds a 35% withholding tax, of which 25% should be refunded according to the tax treaty. The final taxation in Finland depends on whether you fall under personal or corporate taxation.

  1. Download the “Snapform viewer” application to your computer; without it, you cannot fill in/save the qdt-format form.
  2. Get form No. 88 from the Swiss tax authority’s website; it is the correct form for Finnish private individuals or companies. Read the instructions on the back of the form carefully. You can find the Swiss franc exchange rate that must be used on the Swiss tax authority’s website. The amounts should therefore be in francs.
  3. Request a “tax certificate” from your broker, which verifies the dividend event and the withholding tax deduction, as well as a “tax voucher,” which confirms that the tax has actually been paid to Switzerland. The language should be English and the currency Swiss francs, according to the instructions.
  4. Send the completed form (a total of 3 identical pages) to the Finnish tax authorities to be “stamped.” In practice, the tax office confirms that you or your company has a permanent residence in Finland.
  5. Send the stamped form and its attachments to the Swiss tax authority and be prepared to wait nearly a year, depending somewhat on the amount. You can also apply for several years’ worth of tax refunds at once, as long as the application is sent within a certain deadline (was it 3 years?).

I understand that this process might dampen the enthusiasm for investing in Swiss companies, or at least for holding them at the time of dividend distribution. I can report back here on how and in what timeframe the process progresses. In the meantime, Multitude’s IR department can feel free to send me a bottle of good champagne; the address is available via private message!

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I got the impression myself that it’s quite a heavy process, so I sold my largest position before the ex-dividend date. Now I’ve been buying back a little since it’s “cheap.” I would definitely like to hear how the process went for you. I have so little in receivables that I thought I’d reclaim them later if/when a larger pot has accumulated.

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Here are Roni’s comments on how Multitude’s wholesale banking operations are granting a 16 million euro financing facility to Nordecum :slight_smile:

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Is there anything new to report on this? We should probably start the same process.

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Hi, I’m still at the stage where I’m waiting to receive a “tax voucher” from Nordnet. The price is €90, and I requested it on May 27th, but there was some email back-and-forth with them about it in between. Let’s hope it arrives soon..

The form itself is already filled out, so as soon as I get the voucher, I will send the form to the Finnish Tax Administration (Verohallinto) to be stamped before submitting it to Switzerland.

So, this is clearly a months-long exercise, and it’s worth considering whether to claim taxes for several years at once. But I wanted to test this process through now. I will update this thread as things progress.

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Here are Ronin’s pre-comments ahead of Multitude’s Q2 results next Thursday :slight_smile:

We expect revenue to decline organically, mainly due to the divestment of micro-lending businesses and interest rate caps in consumer banking. We understand that Sortter will be consolidated into the figures starting around the middle of the quarter, which will provide inorganic support. The company’s EUR 30 million net profit guidance for this year leaves little room for error after a soft Q1, so we are focusing on the underlying profit drivers and cost discipline, which are crucial for the H2-weighted earnings improvement.

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