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The FCA financial market regulator gave the green light late Monday evening for the Munich-based company to process electronic payments in the UK again. Customers could use their cards as usual, the agency said. However, the FCA wants to keep a close eye on Wirecard’s business. The financial market supervisory authority had prohibited Wirecard Card Solutions Ltd with immediate effect from all regulated activities. In addition, the FCA had banned the transfer of funds and assets. The Wirecard parent company filed for bankruptcy on Thursday.
Further lawsuit against Wirecard auditor EY and ex-boss Braun
The law firm Tilp has extended its claim for damages against Wirecard to the auditor Ernst & Young (EY) and former board members of the collapsed payment processor.
“We are convinced of the new defendant’s intentional behavior, at least to a limited extent,” said lawyer Andreas Tilp on Tuesday. In addition to EY, which has checked Wirecard’s balance sheets for years, the lawyers are suing ex-Wirecard boss Markus Braun, the former board member Jan Marsalek and the current head of finance, Alexander von Knoop.
Tilp had already filed a lawsuit against the group and filed for a model case at the Munich Regional Court in mid-May – long before Wirecard’s insolvency. More than 30,000 investors have already turned to the Tübingen law firm, which is also taking legal action against the carmaker VW because of the diesel scandal. A model case is a kind of class action lawsuit, in which one complains in the name of many.
Wirecard had admitted that the balance sheet was 1.9 billion euros short and filed for bankruptcy a few days later. EY’s auditors got the ball rolling because they encountered irregularities while reviewing 2019 balance sheet documents. However, the auditors are accused of not having raised the alarm earlier – they have been checking the Wirecard balance sheets for many years.
Wirecard will also become a case for Viennese prosecutors
In the Wirecard balance sheet scandal, the former board members of the insolvent payment service provider now have an advertisement on their neck in Austria.
A complaint was filed with the Vienna public prosecutor’s office on suspicion of market manipulation and serious fraud, a spokesman for the authority told Reuters on Tuesday. The advertisement is directed against ex-Wirecard boss Markus Braun and the former board member Jan Marsalek, who is currently being searched for by warrant, according to media reports. Both of the accused are Austrians. The law firm of Marsalek’s lawyer did not want to comment on this. Braun’s lawyer was initially unavailable for an opinion.
It is not yet clear whether the public prosecutor’s office will begin investigations. However, it can be assumed that the case will be passed on to the Economic and Corruption Prosecutor’s Office (WKSta), the spokesman for the authority said.
The criminal complaint was brought in on Monday by Viennese lawyer Jörg Zarbl, who above all sees a problem with buying shares in Braun, as he told Reuters. Braun had purchased Wirecard shares for EUR 2.5 million in mid-May, helping the share to jump in price. According to Zarbl, the former Wirecard boss took out a loan of around 120 million euros at the same time and mortgaged two Austrian properties. Research into the land registers would have shown that, said Zarbl. “In my view, it would be necessary to check whether one wanted to send positive signals to the market on purpose”.
The German financial regulator BaFin is also taking a close look at the share purchase because of a possible violation of insider trading regulations. Braun’s investment vehicle – the MB Beteiligungsgesellschaft – stated that the capital market requirements had been fully met.
Berliner Solarisbank interested in Wirecard customers
The Berlin Solarisbank strengthened with a fresh round of financing shows interest in customers of the insolvent payment processor Wirecard.
“We probably understand the business better than anyone else in the market,” Solarisbank chief Roland Folz told Reuters on Tuesday. “We’d be happy to talk to some of the customers and perhaps employees and see how we can help them with our platform.” Folz did not want to comment specifically on the question of whether Solarisbank could also take over parts of the insolvent DAX group such as Wirecard Bank AG. In this context, he emphasized that the company wanted to concentrate on its own growth.
For the current year, Folz, who worked for Deutsche Bank for a long time, expects sales growth of between 60 and 80 percent. “Growth is currently more important than profit,” summarized Folz. The startup, which was founded in 2016 and has its own banking license, has built a platform that other companies can connect to in order to become providers of financial services themselves. The company now has more than 400,000 end customer accounts. In the Corona crisis, Berliners launched a new round of financing.
“The 60 million euros we have raised are significantly more than originally targeted,” said strategy director Layla Qassim and announced that the money would primarily be invested in European expansion. The round was led by financial investor HV Holtzbrinck Ventures. Existing investors such as the Spanish major bank BBVA and the Dutch money house ABN Amro also participated. The Solarisbank is now valued at EUR 320 million.
Wirecard collapse would not hit retail to any greater extent
An end to operations at Wirecard, a payment service provider shaken by a balance sheet scandal, would probably not affect German retail to a greater extent. The company, which has been under the direction of the provisional insolvency administrator since Monday, has only a relatively small market share in credit card payments, according to data from the trade research institute EHI Retail Institute.
Wirecard does not have a network operator license for the Girocard as the most used cashless payment method, said Horst Rüter, head of the payment systems research area and member of the executive board. Wirecard is also not represented in electronic direct debit, Rüter said on Tuesday.
Credit card payments, on the other hand, are made through Wirecard. However, according to EHI, credit cards play a subordinate role in retail payment methods with a share of 7.6 percent – and Wirecard has no dominant role in this regard anyway.
“Wirecard is not one of the largest providers,” said Rüter. “Wirecard’s share is well below five percent.” Several competitors are significantly larger, including Concardis, Payone and Wordline. The parent company Wirecard AG has so far applied for bankruptcy, with the exception of Wirecard-Bank.
“Both larger and smaller dealers are customers at Wirecard,” wrote Birgit Janik, head of taxes, finance and controlling at the e-commerce association BEVH, in response to a dpa request. Accordingly, the bankruptcy filing from Wirecard in retail brings with it questions and challenges – especially in the event that the bankruptcy filing should be rejected due to lack of bulk. “In this case, the merchants no longer have a contractual partner for payment transactions and the agreed payment methods.”
In contrast to brick-and-mortar retail, it is more common in online retail to work with several payment service providers. “The switch to another service provider can also take place at very short notice,” wrote Janik on request.
Wirecard terminates its contract with Braun
Wirecard’s supervisory board has extraordinarily terminated the employment contract of former CEO Markus Braun. This was announced by the payment processing company involved in a balance sheet scandal on Tuesday. Braun resigned because of the scandal on June 19. He was arrested a few days later, but was released on bail. I.
Wirecard with further course capers
It was also wild back and forth on Tuesday for the shares of Wirecard. The papers of the payment processor threatened in its existence climbed in the XETRA trade up to 9.20 euros. At the end of trading, they still cost 5.73 euros, 75.77 percent more than the previous day. The shares of the company shaken by a balance sheet scandal are increasingly becoming a short-term speculative object. Last Friday they had only cost a good euro.
Already on Monday they could more than triple in the meantime – after almost 99 percent loss in value within a few trading days, however. For comparison: just over two months ago, the shares had still cost over 140 euros and at the record high in early September 2018 shortly before the DAX rise, 199 euros had been paid.
Following the group’s bankruptcy filing last week, the North American subsidiary Wirecard North America is now up for sale and the British financial regulator FCA wants to allow the company to continue doing business. On Friday, the FCA shut down the local subsidiary Wirecard Card Systems and prohibited any transfers of funds and assets.
Wirecard should be kicked out of the DAX after the quasi-total loss in September at the latest for the next regular index review by Deutsche Börse. Quite a few market experts shake their heads at this and call for the “Fast Exit”, that is, quick exclusion from the leading index. “Absurd, not a good sign for the stock culture in this country,” said the tenor.
Deutsche Börse reacted on the previous day and announced a revision of its rules for DAX membership. The ejection for Wirecard from the pan-European Stoxx Europe 600 went faster: as of Tuesday they are no longer included.
The violent price erosion of the Wirecard share has hardly any fundamental reasons, but rather is evidence that the low-level paper is mainly bought by speculators who rely on a quick recovery and then cash in just as quickly.
By Adria Calatayud
(Dow Jones / Reuters / dpa-AFX)
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