Wirecard shares plunge after revelation of missing $3b

FRANKFURT • Wirecard suffered the worst stock slump in the history of Germany's benchmark index after revealing that about €1.9 billion (S$3 billion) in cash has gone missing, spooking investors who have endured years of allegations of wrongdoing at the payments company.

The revelation casts doubt on Wirecard's leadership and actual survival. Chief executive Markus Braun, the company's biggest shareholder, has been at the helm since 2002, building the company from a start-up into a payment provider whose technology facilitates transactions around the world.

Ernst & Young was unable to confirm the location of the cash in certain trust accounts, and there was evidence that "spurious balance confirmations" had been provided, Wirecard said in a statement yesterday.

That is about a quarter of the consolidated balance sheet total, Wirecard said.

"We are stunned," said Mr Ingo Speich, a fund manager at Deka Investments, a top 10 shareholder at the firm. "A new start in terms of personnel is more urgent than ever."

Mr Braun painted the company as a potential victim in a separate statement. He has been resisting calls to resign and defending the company against accusations of accounting fraud, led by a series of articles in the Financial Times.

"It is currently unclear whether fraudulent transactions to the detriment of Wirecard have occurred," said Mr Braun, adding that the company will file a complaint against unnamed people.

The stock dropped as much as 67 per cent to €35.85 in Frankfurt yesterday, the biggest fall on record and the largest for a member of Germany's prestigious 30-company DAX stock index. Wirecard's bonds also suffered a record plunge.

Wirecard warned that loans of up to €2 billion could be terminated if its audited annual report was not published by today. Analysts at Morgan Stanley estimated that Wirecard has available cash of around €220 million if it cannot locate the missing €1.9 billion.

"While we would expect Wirecard to seek covenant waivers, if the banks call €2 billion of debt and that is mostly drawn, then we expect investor focus to turn to the balance sheet and liquidity," said analysts at Morgan Stanley in a note yesterday.

Mr Wolfgang Donie, an analyst at NordLB, warned that the "overall situation at Wirecard can only be described as insupportable and the scandal is now becoming a crisis that is threatening the existence of the company".

 
 

German financial markets regulator BaFin said it is examining Wirecard's disclosure yesterday as part of its investigation into whether the company violated rules against market manipulation.

Ernst & Young told Wirecard that the results will require additional audits after two unnamed Asian banks that have been managing the company's escrow were unable to find accounts with about €1.9 billion in funds, Wirecard said in an additional statement.

Last month, Wirecard headquarters was searched by German prosecutors as part of a probe involving its senior management.

Police also raided Wirecard's Singapore offices in February last year. Singapore prosecutors said eight Wirecard subsidiaries were under investigation in a criminal probe of suspected "forgeries, falsified documents, money laundering, and the round-tripping of funds to support false transactions that were believed to have taken place between 2014 and 2018".

The company had previously hired law firm Rajah & Tann to investigate its Singapore subsidiaries. A final report from the firm in March last year acknowledged accounting oversights and potential criminal liability among some Singapore staff, but did not find evidence that it was linked to Wirecard headquarters.

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A version of this article appeared in the print edition of The Straits Times on June 19, 2020, with the headline 'Wirecard shares plunge after revelation of missing $3b'. Print Edition | Subscribe