Wirecard shares drop 60% after failure to post audit results

Berlin

WIRECARD'S auditor has refused to sign off its 2019 accounts over a missing US$2.1 billion, sending the German payments firm's shares down over 60 per cent on Thursday, as it warned the delay could cause billions in loans to be called in as early as Friday.

Wirecard said auditor EY had informed it that sufficient evidence could not be found for 1.9 billion euros (S$2.97 billion) in cash balances on trust accounts - or around a quarter of its balance sheet total.

Chief executive officer Markus Braun said Wirecard was urgently seeking to clarify the balances in question. "It is currently unclear whether fraudulent transactions to the detriment of Wirecard have occurred. Wirecard will file a complaint against unknown persons," he said in a statement.

Wirecard warned that a failure to provide certified annual and consolidated statements by Friday would allow approximately two billion euros in loans to be terminated.

In-house auditor EY had regularly approved Wirecard's accounts in recent years, and its refusal to sign off for 2019 provided dramatic confirmation of the failings highlighted in an external probe by KPMG last month.

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The company has long been a target of short sellers who have questioned its financials. They responded by sending Wirecard's shares down by 60 per cent in Frankfurt trading, wiping eight billion euros off its market worth.

Bondholders also took fright: Wirecard's 2024 paper fell by 23 US cents on the day to trade at 58 US cents on the euro.

Wirecard had already delayed its annual report following last month's report by KPMG that addressed allegations of fraud and false accounting in a series of investigative reports by the Financial Times.

In the most serious finding in the report, covering the years 2016 to 2018, KPMG said it had been unable to verify the existence of one billion euros in revenue which Wirecard booked through its third-party acquiring partners.

Activist investors, led by British fund manager Chris Hohn, seized on the KPMG audit to demand the head of CEO Braun, who owns a 7 per cent stake in Wirecard. Mr Hohn followed up by filing a criminal complaint with the Munich prosecutor.

Prosecutors raided Wirecard's headquarters in a Munich suburb on June 5 and opened proceedings against management as part of the probe initiated by BaFin, Germany's financial regulatory authority. A spokesman said it would investigate the latest delay to results.

Wirecard has said it was cooperating with the investigation and the allegations against it were unfounded. REUTERS