Wirecard shares recover after denying fraud allegations
Wirecard is considering legal options after a report by Financial Times of alleged wrongdoing hits shares
Frankfurt — Wirecard said on Monday that neither it nor its law firm had found conclusive evidence of criminal misconduct after the Financial Times alleged wrongdoing at the Singapore office of the German payments company.
CEO Markus Braun said the Munich-based company had informed regulators in Germany and Singapore of investigations by its own compliance team and law firm Rajah & Tann into concerns raised last April by a member of staff.
“Until today they didn’t find any proof, or conclusive findings, that any of these allegations are true,” Braun told analysts on a conference call.
Braun said he also expected the external probe to end quite quickly. He pledged to disclose its findings in full: “We do not expect any material thing to come up from this process.”
Braun’s comments helped to fuel a 20% rebound in Wirecard shares, erasing half of the losses triggered by the FT’s reports last week alleging forgery and falsification of accounts.
Wirecard had dismissed the two FT reports on Wednesday and Friday as “inaccurate, misleading and defamatory”.
It issued a more detailed response on Monday, saying that a member of its Singapore team had in raised concerns about the alleged actions of a finance team member there.
The company then started an investigation, which found no evidence to support the allegations. “Furthermore, there were indications that the allegations could be related to personal animosity between the employees involved,” Wirecard said.
Rajah & Tann, in a statement on Monday, confirmed that it had sent a letter to Wirecard on February 3 which stated that its inquiry was ongoing. “To date we have made no conclusive findings of criminal misconduct on the part of any officer or employee of the company,” said the letter.
Short sellers' favourite
Singaporean police on Monday said they were looking into the reports of alleged financial irregularities.
Braun, Wirecard’s largest shareholder with a 7% stake, said the company did not rule out legal action against the FT.
Wirecard, founded in 1999, has been a perennial target for speculative short sellers — market players who seek to profit from falls in a company’s share price — who have questioned its accounting methods and rapid international expansion.
These attacks have caused huge volatility in Wirecard’s stock, though its share price has rebounded repeatedly, with the company last year entering the blue-chip DAX index.
The allegations have not, however, led to any investigations of the company by Germany’s financial regulator or state prosecutors. Instead, both are investigating the short sellers on suspicion of market manipulation.
The Munich state prosecutor’s office on Friday said it had found no evidence of the alleged wrongdoing reported by the FT.
Most sell-side analysts remain bullish on Wirecard, with 10 out of 28 rating the stock a ‘strong buy’ and a further 13 a ’buy’, according to Refinitiv data. Their median price target is €208 — 70% above where the stock was trading after it bounced on Monday.
UBS analyst Antonin Baudry on Monday reiterated his ''buy'' rating and price target of €240, citing the company’s rebuttal of the FT reports, its growth prospects and relatively low valuation in relation to the payments sector.
Wirecard said that the allegations by the Singapore staffer related to potential compliance breaches between 2015 and 2018.
These concerned revenues of €6.9m and costs of €4.1m, as well as an internal transfer of intellectual property worth €2.6m.
The company’s compliance team found that the allegations were “unfounded, full stop” but it brought in Rajah & Tann to investigate, said Braun, adding that this was standard procedure because the claims were material in scope.
Wirecard reported on January 30 that its fourth-quarter revenues grew 40% and core earnings by 37%, and confirmed its guidance for profits of €740m-€800m this year. Braun stood by that forecast.