This is how Wirecard went from being an analyst to a $ 2.2 billion accounting scandal, and it cost SoftBank hundreds of millions in the process.

2020 06 23T100749Z_187391300_RC2YEH9BAEAR_RTRMADP_3_WIRECARD ACCOUNTS.JPGREUTERS / Michael Dalder

  • Wirecard, one of Europe’s leading financial technology companies, is at the heart of one of the region’s largest corporate accounting scandals in recent years.
  • The company’s shares have fallen more than 80% since it admitted that auditors were unable to track € 1.9 billion in their financial accounts.
  • Last week, the firm’s chief executive officer resigned and was arrested Monday night.
  • Tech investor giant Softbank could lose hundreds of millions of dollars due to the scandal, while raising numerous questions for the European financial technology industry.
  • Business Insider rounded off a timeline of events that led to the once-worthy scandal surrounding the fintech group.
  • Visit the Business Insider home page for more stories.

Wirecard AG, a German payment processor, was once touted as an analyst and investor favorite for its growth history, which saw it go from being a minor player to one of Germany’s largest companies in just over a decade.

After dismissing its financial results for the fourth time in mid-June and declaring that € 1.9 billion that had disappeared from its balance sheet probably does not exist, Wirecard came under intense scrutiny leading to the eventual resignation and arrest of its CEO.

Wirecard, in a nutshell, has had a week from hell.

Here’s what you need to know about the downfall of the German tech industry star.

Wirecard is a global provider of financial solutions in the fields of mobile payments, e-commerce, digitization and financial technology. As of 2018, Wirecard collaborated with over 250,000 companies, including Allianz, Qatar Airways, KLM, Transport for London, and many other well-known names.

The company now embroiled in scandals was once the world’s favorite in the fintech world as it outperformed its competitors, finally reported a net income of € 2.1 billion in 2018 and finally rose to the DAX, the stock market index of 30 Germany’s largest companies.

In September 2018, Germany’s second largest lender, Commerzbank AG, was removed from the prestigious DAX index. It lost its status as a first-rate German company only to be replaced by Munich-based Wirecard. At that time, Wirecard had 22.5 billion euros in market capitalization, more than double that of Commerzbank.

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Wirecard has long been criticized, and this week Reuters described it as “subject to repeated accusations by whistleblowers, journalists and speculators that its income and profits had been increased through bogus transactions with obscure partners.”

Many of the recent allegations against Wirecard have been published by the Financial Times, which began a public investigation in 2019, highlighting the company’s alleged improper accounting behavior in Asia and the Middle East.

Wirecard has frequently denied the FT reports and has accused the newspaper of reporting false documents and information.

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The company’s scandal hit a tipping point last week, however, when it failed, for the fourth time, to report its full-year results for 2019. Here’s a brief timeline from last week for Wirecard:

  • On June 18, Wirecard was scheduled to report its full-year 2019 and first-quarter 2020 results, an announcement that had already been delayed three times. But his EY auditor was unable to give him the go-ahead, as he could not find “sufficient audit evidence” of € 1.9 billion on the company’s balance sheet.
  • The company stated that in the event that the financial results were not disclosed the next day, June 19, loans made to Wirecard in the amount of € 2 billion could be canceled.
  • On June 19, Wirecard CEO and largest shareholder Markus Braun resigned in “mutual consent” with the board, after serving for nearly two decades. James Freis was named interim CEO with exclusive power of representation.

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  • On June 22, Wirecard claimed that the missing 1.9 billion euros probably did not exist, and withdrew an evaluation of its financial results. Its shares fell as much as 46% in one day.
  • On the same day, the company’s chief operating officer and Braun’s close ally Jan Marsalek were removed.
  • Acting CEO Freis informed employees that they expected a major restructuring that could involve a sale of assets to safeguard the company’s interests.
  • On June 23, the now former CEO of Wirecard, Markus Braun, became authorities, and was arrested by the German police in Munich on charges related to market manipulation and false data.
  • He was released on bail of € 5 million, but prosecutors said he would have to report to the police weekly.

The Wirecard stock price crash has erased millions of dollars in profit for a group of SoftBank executives and an Abu Dhabi fund that invested in a complex $ 1 billion trade in the company’s stock.

In April last year, SoftBank Investment Advisors, which manages the group’s $ 100 billion Vision Fund, structured an investment of approximately $ 1 billion in Wirecard through a convertible bond, a type of debt that can be paid in shares instead of cash, according to the Financial Times. .

According to the report, the fund will now lose hundreds of millions of profits it could have reaped from the Wirecard trade.

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Carmen Reinicke contributed to this report.