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Technology Stocks : Fintech

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From: Sr K6/25/2020 3:37:05 PM
   of 176
From WSJ
WDI -71%


1:11 PM

Wirecard Files for Insolvency After Revealing Accounting Hole

Shares crash 70%, deepening the decline in the German fintech company’s market value over the past week

Battered German fintech company Wirecard AG has filed for insolvency proceedings, days after revealing that more than $2 billion in cash missing from its balance sheet probably didn’t exist.

The move is the latest in a startlingly swift unwind for a company that until recently was a shining star in Europe’s tech scene. Wirecard is the first insolvent company in the DAX 30, Germany’s premier stock-market index.

Shares in Wirecard crashed 70% after the announcement Thursday, meaning the company’s market value has all but evaporated to less than €500 million from almost €13 billion ($14.5 billion) a week ago. The collapse began on June 18, when Wirecard said its auditors couldn’t confirm the existence of €1.9 billion meant to be held in trust accounts. The company later said the money probably didn’t exist.

For years, Wirecard’s shares skyrocketed under the leadership of former Chief Executive Markus Braun, who touted the company as a moneymaking machine whose payments-processing business would be essential for global commerce. While the shares rose, investors who bet against Wirecard’s stock and the media repeatedly raised red flags about the company’s finances. German authorities did little to check on the accusations.

Rest to the end

Ferdinand Lavin, deputy director and spokesman of the Philippines National Bureau of Investigation, said he had information Mr. Marsalek had been in the country, but had no hard proof yet. “We are investigating the Wirecard fraud,” he added.

Mr. Marsalek couldn’t immediately be reached for comment.

Wirecard said Thursday that it is also evaluating whether insolvency applications have to be filed for its subsidiaries. One of them, Wirecard Bank, which had €1.7 billion in deposits, isn’t part of the proceedings. BaFin has appointed a special representative to handle the bank, the company added.

Wirecard’s unraveling is the most prominent in the digital-payments space, which exploded along with online shopping and gambling. The industry has created a number of profitable businesses that mostly sit in the background of billions of transactions.

Wirecard’s fall would represent one of the biggest corporate scandals in Europe since the collapse of Portuguese lender Banco Espírito Santo amid allegations of fraud in 2014.

The problems with Wirecard’s books may stretch back years. The company withdrew its results for 2019 and the first quarter of 2020, and warned that its financial results for previous years could also be affected.

The likely fictitious €1.9 billion is equivalent to all the net income Wirecard has reported over more than a decade.
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