In autumn 2018, Wirecard will push Commerzbank out of the Dax and be celebrated by investors. A year and a half later, the payment processor is in a deep crisis. At the heart of the storm: The company’s Vienna boss, Markus Braun, who cannot refute allegations of balance sheet manipulation.
For Markus Braun it’s all about now. No other boss of a Dax 30 group is so strongly connected to his company and at the same time is criticized as much as the Wirecard boss. The Viennese has been guiding the payment processor for almost two decades, he is the largest shareholder and has led the former Neue Markt booth into the premier class of the Frankfurt Stock Exchange. But the accused of manipulating the balance sheet cannot shake off the successful manager. After massive slumps in the course and unsuccessful communication about a special audit, the Braun supervisory board now removed some of its power and reorganized tasks on the board. The demands for a resignation of the 50-year-old remain.
“The management board has gambled away any trust,” says Ingo Speich, head of corporate governance at the fund company Deka – one of the group’s major investors – and finds unusually harsh words with regard to a Dax group boss. With the new structure announced on Friday evening in the Management Board, Wirecard is starting with the necessary clean-up work. “If all power structures continue to be geared towards Braun, this is not the liberation stroke for Wirecard.”
Speich adheres to his request for Braun to resign. By the beginning of July, Wirecard had to clarify the allegations of balance sheet fraud.
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The graduate in business information technology, Braun, has long been criticized for concentrating too much power on himself and for not having made the payment service provider ready for the DAX. He is now under fire because of a special inspection by KPMG. The auditors had plowed through the company’s balance sheets for months, but could not refute allegations of manipulation. They also accused Wirecard management of hindering investigations and failing internal controls.
“Reputation is everything”
Andreas Mark, fund manager at Wirecard’s major shareholder Union Investment, criticizes: The “slow reconnaissance” highlights “fundamental weaknesses in governance” at Wirecard. Wirecard has also got into trouble with the financial regulator Bafin. Since February 2019, the authority has been investigating whether Wirecard has provided the capital market with timely and complete information about inside information.
Investors fear that customers will soon turn away too. “There is a risk that the loss of image will affect the operating business,” says Speich. “Reputation is the be-all and end-all for a financial group like Wirecard.” The group with its 5,000 employees not only controls cashless payments via smartphone or credit card at the checkout, but also takes risks for retailers and customers.
At the end of 2020, the contract from Wirecard boss Markus Braun is due to be extended.
(Photo: picture alliance / dpa)
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Wirecard checks in online shops whether the customer is trustworthy, accepts the purchase price and forwards it minus a fee to the retailer. According to experts, business with partner companies abroad, which is now at the center of the allegations of manipulation, is particularly lucrative.
To date, Braun has maintained an annual result of over one billion euros. The figures for the first quarter are expected for May 14.
Analysts are keeping their fingers crossed
In autumn 2018, Wirecard was still celebrated by investors when the payment service provider pushed Commerzbank out of the Dax. The shares continued to climb to almost € 200. At that time, the market value was around 23 billion euros higher than that of Deutsche Bank. But the allegations expressed in reports from the “Financial Times” and other media made the titles a gamble for gamblers. It went up and down like no other Dax value. In the meantime, the shares cost less than half, analysts lowered their price targets and ratings in a row, and DZ Bank stopped their valuation completely.
“Wirecard needs a major transformation to regain investor confidence,” said HSBC analyst Antonin Baudry. Fund manager Mark is pushing for a fundamental improvement in internal processes. He does not call for Braun to resign, but emphasizes: “Wirecard needs stable, reliable leadership in order to regain lost trust.”
When Braun took over the management post at Wirecard in 2002 at the age of 31, the startup had just survived the wild New Economy era. The Austrian, who describes his companions as visionaries and analysts with a flair for trends, released Wirecard from the dependence on companies that operate gaming and porn sites, capital and a full banking license. Well-known airlines, online travel agencies and retailers are now among the customers. Over the years, Braun has bought millions of Wirecard shares and now holds seven percent.
“No longer the same without brown”
If Braun could not withstand the pressure from investors and had to leave the company from the Munich suburb of Aschheim, this would be a turning point for Wirecard. “Braun is the strategic mind behind Wirecard. Without him, the group would no longer be the same,” says management consultant Marcus Mosen, who previously headed Wirecard rival Concardis.
Like the other board members, Braun’s contract will be extended at the end of 2020. The Wirecard case evokes memories of the fate of MLP: the Heidelberg insurance and finance broker climbed into the Dax in 2001 and was targeted by hedge funds and short sellers like the Neckermann heir Florian Homm a few months later – accompanied by media reports that cast doubt the accounting wake up. In the end, expert reports showed that the financial tricks were legal, but the analyst’s trust was lost.
CEO Bernhard Termühlen threw in 2003. MLP is now only worth 500 million euros on the stock exchange and is no longer listed in any index.
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