Hedge fund short-sellers seize on Wirecard woes, as e-payment firm’s shares collapse amid deepening accounts riddle

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Hedge funds are circling Wirecard AG, the troubled German electronic payment processing company, which saw its share price plummet further on Friday morning (19 June) following revelations of alleged accounting imbalances.

The Munich-headquartered company revealed this week that some EUR1.9 billion worth of reported cash balances – an estimated quarter of its total balance sheet – could not be verified by auditor EY.

Shares in the DAX 30-listed firm crashed following the statement, sliding from EUR100.40 on Thursday to under EUR20 at one point on Friday morning.

Wirecard is now a key a target of several short-sellers, with well-known hedge funds including Marshall Wace, TCI Fund Management, Argonaut Capital, Greenvale Capital and Slate Path Capital building bearish bets against the firm.

TCI, the high-profile activist hedge fund firm led by Sir Chris Hohn, last month filed a criminal complaint against Wirecard alleging “anomalies that may have criminal relevance.”

Meanwhile, Argonaut Capital has warned that the firm may be declared insolvent by the weekend.

Barry Norris, CEO and CIO of the London-based equity long/short hedge fund, explained how the firm was Argonaut’s biggest short position on Thursday morning, observing how the share price of Germany’s previously most valuable financial company “halved in a few minutes”.

“What has amazed us is how the Wirecard share price has been so impervious to substantiated accusations of wrong-doing for so long,” Norris wrote in a commentary, having earlier described the company as showing more “more red flags than you would see at a communist rally”.

According to Norris, Wirecard CEO Marcus Braun has “brazenly tried to portray the company as a victim of fraud and instead tried to focus investors on apparently strong reported revenue growth.”

Norris added: “If the cash balances are non-existent then logic would also suggest that current trading is equally fictitious.”

In a statement on Thursday, Wirecard pointed to “spurious bank confirmations” from two Asian banks that had reportedly been tasked as trustees of the cash in question.

Wirecard CEO Marcus Braun said “there are indications that auditors have been presented with incorrect balance confirmations for fraudulent purposes by a trustee or from the area of these banks”.

The two Philippines-based banks, BDO Unibank and The Bank of the Philippine Islands, separately denied that Wirecard was a client, and have reportedly begun separate probes into the matter.

The announcement over the missing EUR1.9 billion stalled Wirecard’s previously-twice-delayed annual 2019 results statement, which had earlier been rescheduled for release on Thursday.

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