Singapore raid is latest blow to storm-tossed Wirecard
Shares in German payments processing firm Wirecard were headed for a stormy finish to a turbulent week Friday, as fraud allegations piled on top of investors’ concerns about lack of transparency.
Singapore police confirmed to AFP they had searched premises belonging to the Munich-based financial technology firm, after a string of Financial Times (FT) reports alleging false accounting in its Asian arm.
A Wirecard spokesman told AFP Friday that the fin-tech firm had “provided the police with material in regards to their inquiry” in the city-state.
“We intend to continue to cooperate… and pledge to complete our internal inquiry and disclose these findings to the public,” he added.
But reports of the raid prompted a fresh tumble for Wirecard to the bottom of the DAX index of blue-chip German stocks, to trade at 92.58 euros ($104.93) by 4:45 pm in Frankfurt (1545 GMT) — down 16.4 percent on the day.
Its shares have lost more than 30 percent of their value since the start of the year, mostly since the FT reported “potential violations of Singapore law” by an executive based there on January 30.
The group’s market capitalisation has fallen almost nine billion euros in the eight working days since that first article, to 11.5 billion.
– Market manipulation? –
Wirecard has challenged the allegations, saying it plans legal action against the Nikkei-owned FT over its string of investigative stories.
Meanwhile separate investigations by Munich prosecutors and German financial markets watchdog Bafin are looking into whether deliberate market manipulation could be behind the negative headlines.
“The defamatory accusations made by the FT against employees of Wirecard are unfounded,” the company spokesman said.
Wirecard has issued similarly combative statements after each FT publication.
In its latest report Thursday, the financial daily alleged two senior executives at its Aschheim base outside Munich knew about the use of an accounting trick known as “round tripping” to pad its books in the Asia region.
The succession of blows early this year have struck Wirecard soon after its greatest triumph.
It launched in 1999 as a processor for electronic payments, at a time when major banks were ignoring the field and the embryonic fintech scene.
Late last year, Wirecard elbowed Germany’s second-biggest lender Commerzbank out of the prestigious DAX index, outweighing giant Deutsche Bank with a market value of more than 23 billion euros.
However, many investors have remained leery of the financial wunderkind and its “very complicated” business model, Warburg bank analyst Marius Fuhrberg told AFP.
– Past attacks –
“There have already been questions in the past about (Wirecard’s) accounting,” Fuhrberg recalled.
In 2008, the firm found itself at war with German small shareholders’ association SdK, which accused it of false accounting, while Wirecard itself suspected market manipulation.
Later, in 2016, the share price slid after a note from previously unknown market watchers Zatarra Research alleging false financial communication and fraud circulated.
Concluding someone had attempted to manipulate the share price, market watchdog Bafin passed the case on to Munich prosecutors.
One person was eventually charged last year, while another paid to avoid prosecution.
“Wirecard has often come under pressure from attacks by short-sellers, and that makes investors sensitive to any new attack,” Warburg’s Fuhrberg said.
Short sellers make money by agreeing to sell shares they do not yet own at a set price on a certain date, hoping they will be able to buy them for less and make a profit on the difference.
Against that background, accusations from a “very well established newspaper” create “special uncertainty”, “especially when the company’s reputational skin is not very thick,” said Oliver Roth of Oddo Seydler bank.