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- The DAX group Wirecard has become a case for the public prosecutor within eight days from a hope for a DAX.
- The company wanted to present strong business figures last Thursday. But everything turned out differently. The company only had to file for bankruptcy a week later.
- It is a historic crash.
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It only took a little over a week for the German fintech hopefuls and DAX group Wirecard to become a case for the public prosecutor. It is already a historical thriller in German economic history. At the same time, however, it is also an unprecedented case of value destruction: in April the Wirecard share stood at 130 euros, on Friday the paper was trading at just under 1.50 euros. This dissolved 12 billion euros into thin air. A total crash.
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How could it come to this? And what has happened in the past eight days?
June 18, 2020 should be a relief for the DAX Group. The company from Aschheim actually wanted to present strong business figures for 2019 on the day.
Hours before the start of the conference, a real bomb exploded: auditor Ernst & Young (EY) refused to give his certificate for the balance sheet. There was no audit evidence for trust accounts in the amount of 1.9 billion euros – and that before a balance sheet conference. The total corresponds to a quarter of the Dax Group’s total assets.
The company’s share price fell nearly 60 percent within 15 minutes. In plain language, this means that the market value of the billion dollar company has more than halved in a quarter of an hour. In the history of Dax, this is a historic event, for the group a real “Armageddon”, as the “Wirtschaftswoche” later commented.
The same day, the group drew personal consequences: Board member Jan Marsalek, responsible for the operative business (COO), was released with immediate effect. A year ago Marsalek was accused by the “Financial Times” of being personally involved in the accounting scandal as the manager responsible for the obscure third-party companies.
The CEO Markus Braun finally resigned on Friday with immediate effect. Interim CEO was James Freis, who only started his job as the new Compliance Board on Thursday.
Arrest warrant for ex-CEO Braun
The next bad news followed on Monday: Arrest warrant was issued against ex-CEO Braun, whereupon he volunteered. The public prosecutor accuses Braun of having inflated Wirecard’s total assets and sales as a result of fake income.
For a bail of five million euros, the ex-Wirecard boss was finally released on Tuesday. The district court suspended the arrest warrant against conditions, the Munich public prosecutor said in the afternoon.
The public prosecutor had been investigating Braun for weeks, but because of the suspicion that he had misinformed investors in two ad hoc releases.
One week after the planned exemption: Wirecard’s bankruptcy
On Thursday, the crash of the former beacon of hope was finally complete: Wirecard’s board of directors decided to file for bankruptcy at the Munich District Court.
The specific reason for the bankruptcy are loans totaling 1.3 billion euros that Wirecard received from other financial institutions. Because of the recent scandal, “these loans were likely to be terminated and expired”. A total of 800 million euros would have been due by June 30, and another 500 million euros by July 1.
In view of this, the company management had determined that “the continued viability of the company was not guaranteed” – and decided to go into bankruptcy, Wirecard announced on Thursday.
International investigation against Wirecard
The crash is over, the workup begins. The authorities are at the very beginning of the investigation and are searching internationally.
The former and first fired Wirecard board member Jan Marsalek is suspected in the Philippines. According to the Philippine Minister of Justice Menardo Guevarra, Marsalek was in the capital Manila on March 3 and left two days later. “However, there is some evidence that he recently returned and may still be there,” said Guevarra. The Philippines has also launched an anti-money laundering investigation into the alleged airbill affair of € 1.9 billion.
The public prosecutor’s office in Munich also appears to be investigating him. According to information from the “Handelsblatt” Marsalek is searched by warrant, but there is no official confirmation. The prosecutor’s office did not want to “confirm or deny” the fact, which indicates that it simply does not want to make the investigation official.
The key question of the scandal to be resolved
The fundamental question that arises in the scandal is that of the almost two billion euros that cannot be found. Has Wirecard fallen victim to a huge fraud – or has Wirecard deliberately manipulated its own balance sheet? Both are serious crimes. And both circumstances are so serious that they decide in one way or another on the future of the DAX Group.
If it turns out that Wirecard, as the company itself represents, is the victim of the scandal, it is entirely possible that this news could restore confidence in the market and the healthy core business of the company will make it out of bankruptcy. But that is not certain. However, it would be a spectacular turning point in the Wirecard case.
The DAX Group internally assumes that the 1.9 billion euros are commissions for real business, Business Insiders learned from corporate circles. Supposedly there is evidence of this in Aschheim. Wirecard believes that the almost two billion euros are not an air booking.
For legal reasons, Wirecard declines to comment on this matter. At this point, however, it is completely open whether the investigating public prosecutor’s office in Munich I comes to this conclusion.
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