What's behind the wipeout at Wirecard?

Wirecard, the German blue-chip technology group that specialised in payment-processing, has collapsed in scandal. Matthew Partridge reports.

Markus Braun, ex-CEO of Wirecard © CHRISTOF STACHE/AFP via Getty Images
Wirecard's ex-CEO, Markus Braun, faces charges of accounting fraud and market manipulation © Getty
(Image credit: Markus Braun, ex-CEO of Wirecard © CHRISTOF STACHE/AFP via Getty Images)

Markus Braun, who resigned last week as CEO of Wirecard, has now been arrested in Germany on charges of accounting fraud and manipulating the share price, says Simon Foy in The Daily Telegraph. He has been accused by authorities of “portraying Wirecard as financially stronger and more attractive for investors and clients” than it actually was (see story below for details). This comes after Wirecard admitted that €1.9bn (£1.7bn) of cash missing from its balance sheet “probably did not exist”. The company is “now scrambling to stay afloat” and is considering a “massive restructuring”.

The latest revelations have been a disaster for shareholders, who have seen Wirecard’s share price plunge by more than 80% over the past few days, says the Financial Times. But things may get even worse, since the scandal throws into doubt the entire performance of its payment-processing business, which was previously deemed the group’s key source of profits. Despite Wirecard’s talk of cost cuts and asset sales, lenders are unlikely to accept a delay in payments if the company “does not have much of a real franchise that generates real cash flow”. So there is a good chance that equity holders “will be left with nothing”.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri