Who Benefits from Wirecard’s Collapse? Short Sellers and Hedgies that Bet Against the Firm

Investors who bet against Wirecard AG (WDI:DE) are poised to collect on their bets. Wirecard filed for bankruptcy last week following the announcement the Fintech had misplaced €1.9 billion. The aftershocks of the announcement saw the CEO resign and then arrested. The former COO is on the lam, reportedly somewhere in Asia. For investors on the right side of the trade there have long been rumblings that Wirecard was little more than a facade of a successful payments platform. Investigative reporting by the FT made serious allegations regarding the propriety of the Wirecard many months ago. Somehow regulators failed to read the report or simply were sufficiently incompetent on their job.

For short-sellers in shares of Wirecard the payout may be profound. Two weeks ago, shares in Wirecard were trading at over €100/share. Today, Wirecard shares trade around €5/share but at one point they were hovering just above one Euro. Wirecard shares could go to zero as the bankruptcy proceedings attempt to sort out the financial mess.

It has been reported that short-sellers have made over $1.2 billion in their bets against Wirecard. TCI Fund Management based in London apparently is up about $217 million in the trade.

A report by Bloomberg today highlighted that another group of hedge fund investors is poised to collect on Wirecard’s dumpster fire. Traders that bought credit insurance against Wirecard debt may earn around $212 million. The report indicated that credit derivatives written on a €500 million Wirecard bond – due in 2024 – now trades at around €0.20 on the Euro.

Meanwhile, shares in Wirecard have bounced from its low as gamblers play the volatility game.

Of course, there are always two sides to any trade and the losers include the thousands of individual and institutional investors that were mistaken in their belief that the firm was a Fintech success.

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