Hardly any other German company has made investors as rich as Wirecard in the past five years. The share price of the payment service provider from a suburb of Munich has skyrocketed since September 2013 by a whopping 700 percent. Who put 10,000 euros in the company at that time, now has 78,400 euros in his account. Anyone who would have boarded another five years earlier would have made 392,000 euros.
Because of this insane price rally, Deutsche Börse will probably decide this Wednesday that Wirecard will rise to the German Dax index. In the top German stock exchange league, the financial technology company will most likely take the place of the renowned Commerzbank. Measured by market value, the 5000-employee company from the Munich suburb of Aschheim has long since overtaken the 50,000-employee group from the Frankfurt financial district.
But what is Wirecard anyway? How does the company make its money? And why does it have a grubby reputation to this day? Answers to the most important questions about the potential Dax ascension.
Why should Wirecard climb into the Dax?
The composition of the Dax is reviewed quarterly in an automated process. Simply put, computers calculate the stock market value of all companies as well as the average trade turnover of their stocks. Based on these two criteria, Deutsche Börse then compiles a ranking of the 30 most valuable companies. Experts expect Wirecard to overtake Commerzbank in this ranking because of its rapid price rally.
How does the company make its money?
Wirecard is largely unknown to the general public, as consumers only come into indirect contact with the company. Whether customers buy books or travel on the Internet, Wirecard is often the central intermediary between buyers, sellers and their banks.
In concrete terms, if a customer pays by credit card, the money from Visa or MasterCard does not flow directly to the merchant, but goes to Wirecard. Only with a time delay the company then passes the money on to the retailer. Wirecard collects commissions because the company bears the risk and guarantees that the funds are credited to the recipient. The margins for such business are low, but the masses do.
Wirecard's clients include airlines such as Lufthansa, technology groups such as Microsoft and Apple, as well as retail chains such as Aldi and Lidl.
Wirecard makes more than half of its business outside Europe. Above all, the company expanded to Asia, where the Chinese Internet group Alibaba is one of the most important partners. Wirecard made 1.5 billion euros in sales last year and is expected to double in two years.
imago / Action Pictures
Visitors at a Wirecard booth
Who is behind the company?
Wirecard is above all the work of Markus Braun. The 48-year-old Austrian has significantly built up the company. In 2002, three years after its foundation, he came to Wirecard from the management consultancy KPMG, at a time when the then start-up threatened to go broke in the wake of the dot-com crash.
Braun aligned the company to payments on the Internet. In the beginning, Wirecard had mainly customers from the casino and porn sector, because these companies were the first to use the online trade. At first, Wirecard was stuck with a dingy image, and later customers from reputable industries joined.
Braun has become extremely rich with Wirecard. For as CEO, he is with a share package of seven percent at the same time the largest shareholder of Wirecard. The value of his share: almost 1.5 billion euros.
What does Wirecard's Dax promotion mean for the German financial industry?
The fact that the financial technology start-up Wirecard with Commerzbank ousted just a stale financial group, is pure coincidence. But many experts see this change of power as a symbol of the rapid structural change in the financial sector: dynamically growing digital companies are displacing established big banks that can not digitize their business models.
Why has the company been attacked by speculators for years?
The stock market star Wirecard is always in the center of criticism. For years, international trade media and unknown analysts have published reports of dubious deals and financial irregularities in the Wirecard balance sheet.
In 2015, for example, the renowned British financial newspaper "Financial Times" warned in a large series of articles that the Wirecard balance sheet was extremely shaky. Wirecard denied all allegations. A short time later followed another attack. The hitherto completely unknown research institute Zatarra published a 100-page report. The allegations against Wirecard ranged from corruption and money laundering to illegal gambling.
The pattern is always the same: Unknown confront Wirecard with allegations, the stock price falls, the corporation denies the stock rises to new record highs.
At any rate, Wirecard did not permanently harm it. This Wednesday, the paper is near its record high of nearly 200 euros. Analysts from major banks and fund companies certify the company's clean balance sheets.
DPA
The headquarters of Wirecard in Aschheim near Munich
What does the self-confident boss intend to do?
CEO Braun sounds little modest when he talks about the future of Wirecard: "Everything we have achieved so far is, in my opinion, only a tired copy of what we can achieve in the next ten years," he said in April the balance sheet press conference.
With such words, Braun awakens the price imagination of many investors. They buy the Wirecard share because they assume that digitization is only just beginning in many areas and that the possibilities of electronic payment are far from exhausted. "The megatrend of electronic payment is unstoppable and opens up considerable market potential for Wirecard," says Franz Weis, fund manager at the French fund company Comgest.
In fact, Wirecard is growing faster than almost any other German company: in the first half of 2018 alone, sales increased by more than 45 percent compared to the previous year.
But the rapid rise of the Wirecard file also harbors a risk of falling. The company is currently valued at more than sixty times its annual profit in the stock market, no other DAX company is so expensive for investors. By comparison, on average, all DAX companies are rated thirteen times their earnings.
Investors who now rely on the company, so can only speculate on a continued above-average growth. Disappointed Wirecard but the ever-increasing expectations, threatens the crash.