Brokat

» see brokat.com as it lived, on the wayback machine

~ the eulogy ~

Five friends who had met at a student society in Tübingen registered Brokat Informationssysteme in Böblingen on 21 October 1994, with 158,300 marks of share capital and a piece of software two of them had written. It connected a bank's host system to a web browser and secured the traffic on the way through. The product was called Twister, the problem was real, and for about four years this was a sensible company solving it.

The listing came on 17 September 1998 at 64 marks a share, the fiftieth stock on the Neuer Markt. Intel bought in for 10 million euros in November 1999, about one percent of the company. Siemens followed in October 2000 with roughly 141 million marks and a supervisory board seat. On 10 March 2000 the share touched 195 euros, the same day the Neuer Markt's own index set its all-time high, and the company from Böblingen was worth more than Porsche. By the end of that year it employed 1,438 people across seventeen countries, on revenue of 120 million euros and losses of 126 million.

What it did with the paper was buy two American software companies. Blaze Software and GemStone Systems were announced in June 2000 for a combined 831.7 million dollars, all of it in Brokat stock. Blaze had 18 million dollars of revenue and a 26 million dollar loss behind it. Both were sold again on 15 August 2001, together, for about 19 million euros. Meanwhile the finance director had placed a bond in March 2000, at the top: 125 million euros at 11.5 percent, arranged with WestLB and Deutsche Bank, costing a million euros a month to service.

In 1998 I was getting online over a 33.6k modem and what I could see of the web was personal pages and chat. The money that year was in the plumbing, and the plumbing was built to go unnoticed, since the entire point of Twister was that a customer clicking through to an account balance never learned any of these names. I read about Brokat for the first time a quarter of a century after it briefly outvalued a car company.

~ the dossier ~

~ what twister did ~

Twister sat between a bank's host system and the public internet and let one talk to the other without being exposed to it. Achim Schlumpberger and Michael Schumacher, the two engineers among the five founders, wrote the first version before there was a company to sell it. WestLB and ABN AMRO ran it in Europe. In North America the customer list included Bank of America and Wells Fargo, and those contracts went to Metavante in September 2001 for about 19.5 million dollars, with sixty-nine brokerage clients attached.

~ the bond ~

The 125 million euros at 11.5 percent is the hinge. It was raised in March 2000 on terms a 195 euro share price made look cheap, and the covenants outlived that share price by twenty months. Volker Grub, the administrator who eventually ran the estate, called the rulebook a nightmare.

By autumn 2001 the bondholders had the only veto that still worked. They had already blocked the sale of the mobile division earlier in the year, afraid of a cheap break-up. Dirk Pfeil, brought onto the supervisory board to restructure, put a plan to the shareholders on 12 November: the bond would be exchanged for cash and a majority of the equity. The same day the company reported that it was overindebted. The shareholders approved the plan and the bondholders turned it down.

~ the sale of the parts ~

The mobile and payments division, 343 people, was notarized over to eOne Global on 22 November 2001, one day before the filing, for 28.25 million euros instead of the 42 million first agreed. Grub approved that sale on 6 December. The banking business had been carved into Brokat eFinance Technologies earlier in November with about 150 jobs in it, and on 5 January 2002 Data Design of Munich, a rival since the beginning, bought it and kept 45 of the people. The name moved on from there into IND Group in Hungary, then to Misys, and brokat.de today redirects by way of Misys to Finastra.

Michael Janßen filed on the Friday with negative equity of 51 million euros. The share finished the day at about half a euro.

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