Wednesday 20 November
Oct 16, 2019 @ 15:48

Fintech icon denies fraud allegations that sent stock plunging

 

by Tom BARFIELD

German payments processing firm Wirecard denied Tuesday a new round of allegations of accounting irregularities, after a Financial Times article sent its stock plunging.

Since the start of the year, Wirecard has denied repeated FT reports claiming it was padding the books, even accusing the financial broadsheet of colluding with investors betting against the company.

But the FT stood by its reporting even when German authorities announced an investigation.

The paper published Tuesday internal communications and financial reports it said contained “strong indications” that hundreds of millions of euros of payments processed for some Wirecard clients “could not have taken place”.

The company firmly rejected the accusations.

“Wirecard categorically rejects these allegations of impropriety,” it said on its investor relations website.

By 3:45 pm (1345 GMT) in Frankfurt, the shares were down 14.2 percent, at 120.10 euros ($132.06), making up some of the losses suffered immediately after the report’s publication Tuesday morning.

After FT articles in January-February reporting the firm’s Singapore-based Asian arm was cooking the books, the stock tumbled 40 percent — wiping nine billion euros off its market capitalisation — within a few weeks.

– ‘Invented’ sales and profits? –
The FT’s latest report focused on a Dubai-based payments processing company and Wirecard partner called Al-Alam.

While Wirecard documents show Al-Alam accounted for around half the group’s profits in 2016, processing around 350 million euros of payments per month in 2016-17 for 34 major clients, the FT said it could not confirm any of those client relationships.

Of fifteen named clients they reached, just four told the FT they dealt with Wirecard directly for payments processing, rather than going through Al-Alam.

Others did not respond, could not be tracked down or had long since shuttered.

The FT said its “findings cast doubt on whether substantial sales and profits were actually travelling through Al-Alam to Wirecard — or were simply invented”.

Al-Alam told the paper that it “was not involved in any alleged process to fake revenues or profits”.

– Legal battle –
German financial markets watchdog Bafin in February ordered a ban on “short-selling” or betting against Wirecard shares after wild stock price moves following FT allegations of accounting issues in its Singapore office.

The same month Munich prosecutors said they were investigating a Financial Times journalist over the reports, and in March Bafin filed charges against unnamed people over alleged market manipulation to undermine Wirecard’s share price.

Wirecard on Tuesday again accused the FT of colluding with short sellers “which casts doubt on (the paper’s) motivation”.

Bafin told AFP “the latest incident will flow into our market manipulation probe, which is still ongoing”.

Wirecard in March published a report from Singapore-based law firm Rajah & Tann it said cleared up allegations of accounting irregularities in its Asian subsidiary.

The FT meanwhile added that a law firm it commissioned, RPC, “found no evidence of collusion between FT reporters and market participants”.

Wirecard had long been seen as a figurehead for “fintech” companies that are upending the traditional world of banking and payments.

Founded in 1999, massive growth in the electronic payments it guarantees in exchange for a commission has helped shoot it into the blue-chip DAX 30 index.

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