Wirecard Carnage Continues: CEO Quits As Search For Missing Billions Continues

Tyler Durden's Photo
by Tyler Durden
Friday, Jun 19, 2020 - 08:11 AM

Update (15:41): As the risk of Wirecard default erupts on Friday - it appears the troubled Germany payments company has hired Houlihan Lokey for financing strategy. 

*  *  *

Update (12:10 ET): This can't be good... 

*  *  *

Update (10:45ET): Wirecard's chief executive Markus Braun (now resigned) tweeted Friday morning: "Wirecard has excellent employees, a strong business model, outstanding technology and abundant resources to ensure a great future." 

Minutes after the tweet, Muddy Waters Research fired off a tweet at Braun that read: "None of these things are true." 

*  *  *

Update (8:15ET): Wirecard confirms it's in "constructive discussions" with its lending banks with regard to credit lines and business relationships, according to Bloomberg. 

Bloomberg data shows at least 18 commercial banks are involved in Wirecard's existing revolving credit facilities worth about $2.8 billion. 

Wirecard has warned if Ernst & Young (EY) doesn't sign off on its 2019 accounts by Friday - loans up to $2.24 billion could be terminated. 

The payments company is skating on thin ice into the weekend as liquidity issues emerge.   

*  *  * 

Wirecard shares continued to plunge on Friday morning, falling at least 43% as the saga over the missing $2.1 billion from its accounts worried investors over the company's future, reported Reuters

Germany's once high-flying payments firm could be forced to repay $2.24 billion in bank loans, if its auditor, Ernst & Young (EY), does not sign off Friday on its 2019 accounts due to the billions of dollars missing. Heading into the weekend - it's likely EY will not sign off - thus triggering liquidity issues for the company. 

EY had approved Wirecard's accounts in recent years but refused to sign off for 2019 due to the missing money, which sent Wirecard shares plunging by more than 50% Thursday in Frankfurt trading. 

In the last two days, Wirecard shares have plunged by more than 80%.

Now Wirecard's chief executive Markus Braun has resigned, according to the payments firm on Friday morning, adding that James Freis had been appointed as interim CEO. 

Before Braun's exit, he said in an online video, "It cannot be ruled out that Wirecard AG has become the aggrieved party in a case of fraud of considerable proportions." 

Braun did not say those he suspected of fraud - it was also determined that documents were falsified about the company's relationship with BPI and BDO, the two Philippine banks that were supposedly holding the billions of dollars in escrow accounts.   

BDO issued this statement: "Wirecard is not a client of the bank. The document claiming the existence of a Wirecard account with BDO is a falsified document and carries forged signatures of bank officers. "

The epic unraveling in Wirecard's shares and bonds puts an end to this homegrown Germany technology story after the Financial Times reported last year about accounting fraud. 

At least 18 commercial banks have lending risks with Wirecard and have likely not isolated themselves.