The turbulent payment processor Wirecard has to cope with another blow to the neck. After the certificate refused by EY due to the lack of supporting documents for EUR 1.9 billion in trustee accounts (“balance sheet irregularities”) and the crash of the Wirecard shares, the rating agency Moody’s classified it’s shares as junk.
Moody’s analysts lowered the rating on Friday evening from Baa3 by several levels to B3 (junk). This category is usually avoided by long-term investors. Due to the recent irregularities in the balance sheet, Wirecard bonds are now classified as highly speculative, Moody’s said. A further grading to a C level will be examined.
At the beginning of June, the rating agency announced that it would review the already poor Baa3 rating. Now the analysts refer to the missing receipts for trustee funds worth billions.
Wirecard stock crashes
On the stock market, the gradation in late Friday trading caused prices to fall. After a Xetra close at EUR 25.83 – from the previous day’s loss of almost 62 percent, another daily minus of 35 percent – Wirecard shares fell to EUR 24 after trading hours. The daily low and at the same time the lowest level since the beginning of 2013 had marked the DAX at 19.50 euros.
At the broker Lang & Schwarz, which can also be traded on Saturday, Wirecard shares temporarily traded at EUR 22.25, almost 14 percent below their Xetra closing on Friday.
The daily turnover was exceptionally high at around two million euros.
After Markus Braun’s resignation as CEO, Wirecard shares temporarily recovered to 30 euros.
Update: At the broker Lang & Schwarz, which can also be traded on Saturday, Wirecard shares temporarily traded at € 22.25 today, around 14 percent below their Xetra closing on Friday. The daily turnover was exceptionally high at around two million euros.
The decisive factor for the future of the company will be whether the banks turn off the tap and make use of the option to terminate loans of two billion euros. Wirecard gave investors some hope late Friday evening: The company was in “constructive talks” with its lending banks. According to Wirecard, the banks would be entitled to terminate the contract if the company did not present audited annual accounts but this did not help the share price in the short term.
Evidence of major fraud
Before Braun’s fall, the evidence for a large-scale fraud case had condensed. The Philippine bank BDO Unibank, which allegedly held one of two suspicious escrow (Trust) accounts for Wirecard, said on Friday that the German company was not a customer: “The document claiming the existence of a Wirecard account with BDO is a manipulated document with bogus signatures of bank employees, “it said in the statement of the Southeast Asian banking house and “The case has been reported to the Central Bank of the Philippines.”
The balance sheet scandal centers on two Asian banks and a trustee who has been managing accounts for Wirecard since the end of last year. The accounts reportedly had 1.9 billion euros posted. However, the auditors working for Wirecard now doubt that these 1.9 billion euros actually exist and EY (Ernst & Young) has therefore not audited the annual financial statements.
DWS wants to sue Wirecard
The fund company DWS, which belongs to Deutsche Bank, wants to go to court against Wirecard and its previous boss. “We are suing Wirecard and Markus Braun,” said a DWS spokesman. The head of the DWS flagship fund, Tim Albrecht, told the Frankfurter Allgemeine Zeitung on Saturday: “To protect our investors, we have to find out to what extent the company or Mr. Braun is to be blamed for failures.”
Albrecht emphasized: “We are also calling for a new start for the executive board and the supervisory board. The chairman Thomas Eichelmann has also exhausted all trust after a very short time.” Just a few months ago, DWS had been among Wirecard’s major shareholders with its funds, but most recently it had sold down its holdings.
As unfortunate the Wirecard crash is for the company and the still committed investors – the future of the once so dazzling German company is currently in a gloomy light.
Given the current facts, it is unlikely that the DAX value will recover sustainably in the foreseeable future.
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