The Dax has probably never seen such a debacle. Almost 70 percent price drop in just one day for a company that has been listed in the top German stock exchange segment for just two years and has achieved a breathtaking rise: Wirecard. Or as some investors and analysts blasphemed this Thursday: Auweiacard!
Not only that the allegations of counterfeiting have been confirmed by cooperation partners and the submission of the 2019 annual report has been postponed for the fourth time. The credibility of the payment service provider is gone, banking is on the brink and initial speculations about bankruptcy are making the rounds. The Dax title crashed by more than 65 percent within minutes. A slump that reminds of the crash of the Internet titles on the “Neuer Markt” before the closure in 2003. At lunchtime, the entire company was only worth 4.2 billion euros, bringing up the rear in the Dax.
The financial scene in Frankfurt hadn’t expected such bad news from Wirecard. “We are stunned,” says Ingo Speich, head of sustainability and corporate governance at fund company Deka Investment. The fund and bank houses in Frankfurt am Main are shocked – and above all glad that they have reduced their positions in the past few weeks and that research reports on Wirecard’s operating activities have been discontinued. Every investor, lender and auditor who has backed up Wirecard is now drawn into the scandal.
Doubts about auditor EY
“It is threatening that the receipts for 1.9 billion euros are missing,” said analysts. The suspicion had long been in the room, but now the former high-flyer among the Dax companies himself has admitted it: it cannot be ruled out that these are air bookings, mainly operated by a dubious Wirecard partner under the name Al Alam in Dubai. The business relationship existed from 2013 to mid-May this year. An attempt by the auditing firm KPMG to clarify the allegation of fictitious customer relationships to increase sales failed at the end of April due to the fact that the companies involved did not provide documents and otherwise avoided the special audit. EY was also unable to refute these allegations.
If the suspicion is confirmed, past annual reports could also prove to be wrong – a huge credibility disaster for the responsible auditors at EY. They currently point out that the final exam is still ongoing. “Therefore, we cannot make any further statements,” says EY.
Wirecard and EY now have to find out as quickly as possible how much of the 1.9 billion euros can still be proven in the accounts of two Asian partner banks for which the audit evidence is missing. “Otherwise a court may decide that in the end,” says the company.
Markus Braun sees himself more as a victim than as a fraud. “It is currently unclear whether fraudulent transactions have harmed Wirecard AG,” he said. For his part, he announced criminal consequences: “Wirecard AG will file a complaint against unknown persons.”
As early as Friday, June 19, this stance could cost him practically the entire company. If Wirecard does not present a certified balance sheet, the creditors can call Wirecards for a total of EUR 2 billion in loans. These include Commerzbank, Landesbank Baden-Württemberg, Dutch competitors ING and ABN Amro and some major US banks. In the worst case, EUR 2 billion with a cash balance of just under EUR 600 million at the beginning of the year – this could be difficult: “If the banks draw the credit line, the store will be bankrupt,” says a company expert. It is also quite possible that the banks will give Wirecard some time despite the uncertainties – otherwise they would have to write off the loans.
Klagetsunami piles up
Investors, on the other hand, are already clearly positioning themselves. “We were overwhelmed with lawsuits today,” says Marc Tüngler, chief executive of the DSW investor protection association. First of all, however, you want to wait for the results of the investigation by the banking supervisory authority Bafin and the Munich public prosecutor. It had searched the business premises in Aschheim ten days ago on suspicion of market manipulation. Bafin, the banking supervisory authority, announced: “Of course, the current situation flows into our ongoing market manipulation investigations.”
It is agreed in Frankfurt that the company needs a new top management after this disaster day. “A new start in terms of personnel is more urgent than ever. We hope that the renewed loss of confidence on the capital market will not have an impact on the operative business, ”says Ingo Speich from Deka. At least CFO Alexander van Knoop has to go, but the head of founder, major shareholder and CEO Markus Braun is also up for debate. “I even believe him that he didn’t know anything about the events. He recently even increased his share package. But as CEO, he should have known about it, ”said a company insider.
The only ones who had something to celebrate today were the short sellers, who had recently bet heavily on a price drop. They are the few winners of the disaster.