Share

June 22, 2020
A week of "passion" for Wirecard is announced, listed on the Dax in Frankfurt, after the financial scandal that swept it. With closed markets, Moody's downgraded it to the junk "junk" step due to the disappearance of € 1.9 billion, and now the company is looking for a new financing strategy.

The German fintech company admitted "after further checks" that 1.9 billion euros in the balance sheet "most likely do not exist". The company active in electronic payment services with an intelligent finance platform, whose shares collapsed on the Stock Exchange on Thursday and Friday after the umpteenth postponement of the publication of the 2019 accounts, also withdrew the 2019 interim result published in February, on first quarter 2020 result and "cannot rule out a review of the results of previous years".

 Who knows if he will have the fate of an Arabian phoenix, but analysts are very skeptical about a "positive" end to this affair that led to the CEO's resignation before and which has now put management in desperate search to reassure investors . Time is running out: the company has so far not been able to present an annual balance sheet approved by auditors, and at this point banks could withdraw credit lines worth more than € 2 billion.

Meanwhile, Moody's motivated its downgrade, due in particular to "accounting irregularities and the related implications on the company's liquidity and financial profile following the failure to publish the consolidated consolidated accounts already postponed for 2019". In short, Wirecard is now in a liquidity crisis after admitting that it has been a victim of fraud. CEO Markus Braun has resigned, and Houlihan Lokey has come in his place to review his funding strategy. Meanwhile, efforts are being made to shed light on the missing money, which prevents the publication of the data: the investigation has even ended in Asia. There are two Filipino lenders who are implicated in the affair, BPI and BDO, but both deny having had money deposited by Wirecard. The governor of the Philippine Central Bank Benjamin Diokno has also taken the field to confirm their thesis, namely that the filing documents are false.

The adventure of Markus Braun, who had directed Wirecard since 2002, therefore ends badly. A computer expert from Vienna, Braun lived a quiet and inconspicuous life in the suburbs of Munich, where the Wirecard is based. According to reports from the Wall Street Journal, and according to FactSet data, Braun controlled about 7% of the company's shares, which up to the beginning of this week amounted to 1 billion dollars. With the crater in stocks over the past two days, these stocks are now worth around $ 200 million. "Capital market confidence in the company I have run for 18 years has been deeply shaken," said Mr. Braun in a statement. Braun chaired Wirecard, which has grown to become one of the highest-profile fintech companies in Europe. It processes electronic payments for retailers and others, provides related services and loans and has a high exposure to the rapid growth of the Asian markets. Braun was proud that Wirecard was a rare European technological success, but he also saw it as a global force. "We are active on all five continents," he said in a 2019 corporate video. When initially the budget hole in the company was reported, the CEO of Wirecard called the report "inaccurate, misleading and defamatory", also if in the following days he acknowledged that an internal investigation had been commissioned. In November, after agreeing to have KPMG conduct an external audit of the company, Braun told investors that nothing would be found. "Today we can totally confirm that all these accusations are unfounded." Activist investor Christopher Hohn, who had bet that the company's shares would collapse, instead tried to get Braun fired in April after the audit failed to get answers to certain questions.

 The response had not changed much once the file had gone into the hands of EY, Wirecard's external auditor, now under fire by the shareholders of the payment company. For example, the Dutch shareholder group VEB said it would seek compensation from EY because it had not warned investors before: "Just when EY was supposed to play a protective and clarifying role, it left the shareholders out in the cold," is was their harsh comment. According to the Financial Times, in the past few months, Wirecard staff seemed to have conspired to fraudulently inflate the sales and profits of the Wirecard branches in Dubai and Dublin and mislead EY, the group's auditor for a decade. Since March, Wirecard has postponed the publication of the 2019 results three times, but has since repeatedly told investors that it "expects an unqualified review opinion." And what time is struggling to arrive. Meanwhile, the shares of the German technology group, which only two years ago had been included in the prestigious Dax 30 index after having recorded a market value of 24 billion euros, collapsed after EY's announcement that it could not continue its work audit, and its value has dropped to 4 billion euros. On Friday alone, they lost 36%.