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Wirecard does not need protection from financial supervision
Posted by
Otto Knotzer on June 21, 2020 - 2:36pm
In Germany, financial supervision in the Wirecard case should rather concentrate on providing information and helping with law enforcement. Prohibitions such as for short sales are disproportionate or even counterproductive.
Wirecard headquarters in Aschheim near Munich.
The German financial regulator (Bafin) hurried to help the payment processor Wirecard on Monday morning with a very unusual measure. The Bafin issued a ban on entering new short positions in shares of the financial services provider or increasing existing short positions. With short sales, speculators bet on falling prices of stocks. The DAX group's shares then rose by around 12% on the Frankfurt Stock Exchange.
The crash and slight recovery in Wirecard shares
von Wirecard had dropped by around 50% in the past few weeks after the British business newspaper Financial Times (FT) reported several times about alleged financial irregularities, in particular the manipulation of its own books, by Wirecard in Singapore. The “FT” rapporteur duo also included a journalist who had already written about irregularities at Wirecard in 2016 (to date not proven). In the past few years, fraud and manipulation allegations have been made against the group, which, despite intensive investigations by authorities, auditors and financial analysts, have never been substantiated. The "Frankfurter Allgemeine" reported on Monday that the Munich I public prosecutor's office had initiated an investigation against a journalist from the "FT" on the basis of a criminal complaint.
The wind seems to be slowly turning in favor of Wirecard. However, the Bafin decree and its reasoning are exaggerated. It is very questionable whether there really is a serious threat to market confidence in Germany, which is why the supervisors enacted the short sale ban. The free trading of securities by market participants and the resulting optimal pricing are a valuable asset. Financial supervision should therefore focus better on law enforcement education and assistance. Drastic market interventions such as bans are unnecessary or even counterproductive.
