Wirecard shares plunge as €1.9 billion goes missing
June 18, 2020
Shares in German payment service provider Wirecard lost more than half their value within minutes on Thursday after the DAX-listed company said it was not possible for it to publish a delayed annual report due to worrisome audit data.
Auditors Ernst and Young (EY) had identified "spurious balance confirmations" relating to cash balances on trust accounts that should have contained €1.9 billion ($2.1 billion), Wirecard said in a statement released Thursday morning.
Within 30 minutes of the statement's release, company share prices plunged 66.5% to €35.
Chief executive Markus Braun, himself a major shareholder, claimed that he may have been the victim of a massive fraud. "It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred," Braun said. "Wirecard AG will file a complaint against unknown persons," he added.
€1.9 billion missing
EY uncovered discrepancies in escrow accounts at two Asian banks. The accounts were supposed to contain €1.9 billion to manage risk for merchants using Wirecard's payment services.
Wirecard said EY had received "recent communications from the two banks that have been managing the escrow accounts since 2019, according to which the account numbers in question could not be assigned."
It said there "indications" that the balances had been deliberately falsified "in order to deceive the auditor."
The delay marks the fourth time the company has failed to release its 2019 financial statement as promised.
Second auditor brought in
Articles published last year in the Financial Times had reported allegations of accounting irregularities in Wirecard's Asian operations. The company's advisory board then brought in auditors KPMG to review its 2016-18 books.
Wirecard presented results from an intermediate stage of the audit in flattering light. Prosecutors said this "could have given misleading signals for the company's stock market price."
EY's failure to sign off on the 2019 accounts is a confirmation of the troubles highlighted by the KPMG probe. EY is Wirecard's in-house auditor and has regularly approved the payment service provider's accounts in recent years.
Read more: What’s behind the remarkable rise of German fintech Wirecard?
Wirecard said it is cooperating with EY to clarify the situation.
Once considered a leading German tech company, in recent years Wirecard has suffered under allegations of financial irregularity.
Two weeks ago, prosecutors in Munich said they were investigating Wirecard's four-person board for "market manipulation."
On the latest problems, banks are now threatening to recall loans worth €2 billion if Wirecard doesn't present an audited report by Friday.
kp/rt (AFP,AP,dpa,Reuters)