/Heres how Wirecard went from analyst darling to a $2.2 billion accounting scandal — and cost SoftBank hundreds of millions in the process

Heres how Wirecard went from analyst darling to a $2.2 billion accounting scandal — and cost SoftBank hundreds of millions in the process


2020 06 23T100749Z_187391300_RC2YEH9BAEAR_RTRMADP_3_WIRECARD ACCOUNTS.JPGREUTERS/Michael Dalder

  • Wirecard, one of Europe’s leading financial technology companies, is at the heart of one of the region’s biggest corporate accounting scandals in recent years.
  • The company’s shares have plunged over 80% ever since it admitted auditors could not trace €1.9 billion in its financial accounts.
  • Last week the firm’s chief executive resigned, and on Monday night, he was arrested.
  • Tech investing giant Softbank stands to lose hundreds of millions of dollars because of the scandal, while it begs numerous questions for the European fintech industry.
  • Business Insider rounded up a timeline of events that led to the scandal surrounding the once-valuable fintech group.
  • Visit Business Insider’s homepage for more stories.

Wirecard AG, a German payments processor, was once touted as a darling among analysts and investors for its growth story, which saw it go from a minor player to one of Germany’s biggest companies in just over a decade.

After scrapping its financial results for the fourth time in mid-June and declaring that 1.9 billion euros that had gone missing from its balance sheet probably doesn’t actually exist, Wirecard came under intense scrutiny leading to the eventual resignation and arrest of its CEO. 

Wirecard, simply put, has had a week from hell.

Here’s what you need to know about the downfall of the German tech industry’s star.

Wirecard is a global supplier of financial solutions in the realm of mobile payments, e-commerce, digitization, and financial technology. As of 2018, Wirecard collaborated with over 250,000 companies including Allianz, Qatar Airways, KLM, Transport for London, and many other household names.

The now scandal-engulfed firm was once the darling of Germany’s fintech world as it outgrew competitors, ultimately reporting a net revenue of €2.1 billion in 2018, and eventually ascending to the DAX, the stock index of Germany’s 30 biggest companies.

In September 2018, Germany’s second-largest lender Commerzbank AG was dropped from the prestigious DAX index. It lost its status as a German blue-chip company only to be replaced by Munich-based Wirecard. At the time, Wirecard boasted of €22.5 billion in market capitalization, more than twice that of Commerzbank.

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Wirecard has long been the subject of criticism, with Reuters this week describing it as subject to “repeated allegations from whistleblowers, journalists and speculators that its revenue and profits had been pumped up through fake transactions with obscure partners.”

Many of the recent allegations against Wirecard have been published by the Financial Times, which began a public investigation in 2019, highlighting the firm’s alleged improper accounting conduct in Asia and the Middle East.

Wirecard has frequently denied reports from the FT, and has accused the newspaper of reporting on fake documents and information.

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The company’s scandal came to a head last week, however, when it failed – for a fourth time – to report its full year results for 2019. Here’s a brief timeline of the past week for Wirecard:

  • On June 18, Wirecard was scheduled to report its full-year-2019 and first-quarter-2020 results, an announcement that had already been delayed three times. But its auditor EY failed to give it the go-ahead as it could not find “sufficient audit evidence” of €1.9 billion in the firm’s balance sheet. 
  • The company claimed that in case financial results were not revealed by the next day, June 19, loans made to Wirecard in the amount of €2 billion could be terminated.
  • On June 19, Wirecard’s CEO and largest shareholder Markus Braun resigned from his position in “mutual consent” with the board, after serving for nearly two decades. James Freis was appointed as interim CEO with sole power of representation.

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  • On June 22, Wirecard claimed the missing €1.9 billion likely did not exist, and it withdrew an assessment of its financial results. Its shares crashed as much as 46% in one day.
  • On the same day, the firm’s chief operating officer and Braun’s close ally, Jan Marsalek, was removed.
  • Interim CEO Freis then reportedly informed employees to expect a major restructuring that could involve a sale of assets to safeguard company interests.
  • On June 23, Wirecard’s now former CEO Markus Braun turned himself into authorities, and he was arrested by German police in Munich on charges relating to market manipulation and false data.
  • He was released on €5 million bail, but prosecutors said he would have to report to the police on a weekly basis.

Wirecard’s plummeting stock price has erased millions in dollars of profits for a group of SoftBank executives and an Abu Dhabi fund that invested in a complex $1 billion trade on the company’s stock.

In April last year, SoftBank Investment Advisors, which manages the group’s $100 billion Vision Fund, structured a roughly $1 billion investment in Wirecard through a convertible bond, a type of debt that can be repaid in stock instead of cash, according to the Financial Times.

The fund is now set to lose out on hundreds of millions in profits that it might’ve reaped from the Wirecard trade, according to the report.

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Carmen Reinicke contributed to this report.

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