Wirecard shares tank 65% as in-house auditor declines to sign off on its 2019 accounts

Wirecard (ETR: WDI) shares tanked 65% on Thursday as the payments company announced its auditor to have declined to sign off on the company’s 2019 accounts. The delay, as per the German company, can result in termination of billions of pounds worth of loans.

At £39 per share, Wirecard is now 60% down year to date in the stock market. Before Thursday, the Aschheim-headquartered company had a year to date low of £69 per share that it recorded in mid-May. Wirecard recently partnered with Payhawk (Bulgarian fintech firm) to introduce a new Visa corporate card.

EY fails to find evidence for £1.7 billion in cash balances

According to Ernst & Young (auditor), it failed to find sufficient evidence for £1.7 billion in cash balances on Wirecard’s trust accounts that represents roughly 25% of the company’s total balance sheet. Learn more about the basics of a balance sheet.

CEO Markus Braun of Wirecard said on Thursday that the company is committed to clarifying the balance discrepancies as soon as possible. He further commented in a statement:

“It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred. Wirecard AG will file a complaint against unknown persons.”

Braun also highlighted that if Wirecard does not provide annual and consolidated statements (certified) by Friday, it will result in roughly £1.80 billion worth of loans to be terminated. It is the first time that Wirecard’s in-house auditor EY declined to approve its accounts that confirms the discrepancies pointed out by KPMG’s external probe in May.  

Founded in 1999, Wirecard earned a place in the German blue-chip index, DAX, in 2018. Short sellers have targeted the payments company on numerous occasions in recent years raising questions on its financials. Following the announcement on Thursday, therefore, shares of the company plunged more than 60% resulting in a massive decline of £7.20 billion in its market value.

Ingo Speich of Deka Investment comments on the news

Head of corporate governance Ingo Speich of Deka Investment also commented on the news on Thursday and said:

“We are stunned. A new start is now more urgent than ever. We hope that the market’s loss of confidence will not have an impact on its business operations.”

The £315 billion fund manager also has a stake in Wirecard. The German payments company performed fairly downbeat in the stock market last year with an annual decline of about 20%. At the time of writing, it now has a market cap of £4.08 billion and a price to earnings ratio of 10.95.