How Low Can it Go? Shares in Wirecard Hover Around €1, Board States Business Activities Will Continue

 

The Wirecard AG (WDI:DE) saga has gone from bad to worse as allegations of profound fraud cratered the company when its auditor, EY, uncovered a misplaced €1.9 billion in funds. Since the clear operational failure, the former CEO, Markus Braun, has been arrested and the former COO, Jan Marsalek is said to have absconded to somewhere in Asia.

The new CEO of Wirecard AG, James H. Freis, Jr., is said to have taken a “new approach to investigating the known allegations.”

On Thursday, June 25, 2020, Wirecard filed an application for the opening of insolvency proceedings at the Munich Local Court. In a statement today, the company said that Wirecard’s business activities will be continued. The Management Board is of the opinion that continuation is in the best interests of the creditors.

The Management Board confirmed that the Munich court has assigned Munich lawyer Dr. Michael Jaffé as an “official expert.”

Additionally, Wirecard states that whether insolvency proceedings will be opened is still under review. The company expects a provisional insolvency administrator to be appointed for Wirecard AG shortly.

Wirecard holds many different subsidies and the company states that the business operations of the Group companies including the licensed units are currently ongoing.  It is not year clear if insolvency applications will be filed for subsidiaries of the Wirecard Group.

The company adds that the Wirecard Bank is currently not part of the insolvency proceedings and the electronic funds’ transfer of Wirecard Bank is not affected.

Payouts to merchants of Wirecard Bank will continue to be executed without restrictions.

The company states:

“The licensed legal entities, and where appropriate, Wirecard AG, remain in close contact with the respective regulators. Furthermore, we are in constant contact with the credit card organizations. Wirecard Card Solutions Limited, headquartered in Newcastle, UK, has suspended its business operations due to an order issued by the competent supervisory authority, Financial Conduct Authority. The company has discussed measures with the authorities. The measures are being undertaken and will hopefully enable it to continue operations.”

Meanwhile, shares in Wirecard have traded as low as €1.08 per share. Less than two weeks ago, shares in Wirecard traded at over €100 a share representing an incredible destruction of corporate value. It also represents the market’s belief that Wirecard has little chance of surviving the alleged fraud.

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