Wirtschaftsblatt «FT» shoots DAX group Wirecard ready for storm

The Financial Times continues to report on financial irregularities at the payment service provider Wirecard in Singapore. Since then, the price has plummeted by around 40%. Wirecard vigorously rejects all allegations. The company has experience of violent allegations. So far nothing has been proven.

Wirecard: In the past ten days, the British business newspaper Financial Times (FT) has reported three times about the company's financial irregularities. (Image: Wolfgang Rattay / Reuters)
At the beginning of September, Wirecard was still the high-flyer on the German stock market. After an increase of 430% in three years, the Munich-based company's shares were at a record level of just under € 200, and a few days later, Deutsche Börse announced that the technology company was allowed to rise to the leading index, the DAX. At that time, Wirecard was more valuable on the stock exchange at € 24 billion than Deutsche Bank (€ 20 billion) and Commerzbank (€ 10 billion), which also had to get out of the DAX. Five months later, the high-flyer became a fallen angel. After an almost unprecedented crash since last week, the paper was now at only € 97. What happened?

Manipulation of business figures?
In the past ten days, the British business newspaper “Financial Times” (“FT”) has reported three times about the company's financial irregularities in Singapore, which a whistleblower has raised. As a result, the company's stocks roared in depth on the Frankfurt stock market, sometimes by up to 30%. Wirecard shares also closed on Friday with a minus of 12%. The police had raided the company's offices in Singapore. At the same time, it became known that Wirecard was taking legal action against “FT” and its “unethical reporting”. The allegations against Wirecard employees are unfounded.

The FT had reported that Wirecard's chief financial officer for Asia had shown a total of six colleagues in Singapore how to manipulate their own books in order to convince the Hong Kong authorities to license Wirecard. To this end, sales in a number were faked with customers. It was also about meeting internal earnings targets. The documents from which the newspaper quotes with the salmon-colored paper show that two managers in Germany "had at least some knowledge" of the practice. The newspaper apparently refers to a “report” by the Singapore law firm Rajan & Tann on May 4, 2018. For eight months, it was an internal matter until someone passed the report on to “FT”.

Small profits, big economies of scale
Wirecard is a leading provider of electronic payment systems and risk management to minimize bad debts. The company's technology, which is said to be superior to that of its competitors, is used, for example, when customers shop online by credit card. If a consumer pays with a credit card from providers such as Mastercard or Visa, the money does not flow directly to the retailer, but first to Wirecard, which bears the risk of the transaction and receives a minimal commission. So it is a business with very small profits, but which are enormously scalable.

The report by the law firm Rajan & Tann is now also available to the German “Handelsblatt”. Accordingly, there is obviously suspicion of incorrect bookings and the falsification of documents. According to “Handelsblatt”, this should involve total sales of € 6.9 million, total costs of € 4.1 million and the internal transfer of intellectual property to software worth € 2.6 million. Ultimately, these are ridiculously small amounts with regard to the entire company. Wirecard vigorously rejects all allegations made by “FT”. The firm's investigations were almost complete and no evidence of misconduct by employees had been found to date. The allegations could also be related to personal hostilities between involved employees, it said.

Allegations never proven before
The company, founded in 1999, has repeatedly been criticized by investors and the media for its complicated and difficult to understand accounting. Allegations such as balance sheet cosmetics and money laundering have never been proven, and Wirecard has so far been able to point to a clean slate. This may be one of the reasons why numerous financial analysts Wirecard as well as CEO, founder and major shareholder Markus Braun have so far strengthened their backs. If the news wind changes, the fallen Engel Wirecard can quickly become a high-flyer again.