Wirecard hires Houlihan Lokey to devise a new financial strategy as CEO resigns

Written by: Wajeeh Khan
June 20, 2020
  • Wirecard hires Houlihan Lokey to devise a new financial strategy as CEO resigns.
  • The German payments firm's market value dropped by £9.05 billion in two days.
  • VEB (Dutch shareholder group) says it will seek compensation from Ernst & Young.

In an announcement late on Friday, Wirecard AG (ETR: WDI) revealed to have hired Houlihan Lokey. The U.S. investment bank, Wirecard said, will help devise a new financial strategy for the payments company as Moody’s downgraded the German firm’s rating to junk. According to Moody’s:

“The downgrade of Wirecard’s ratings and review for further downgrade reflects the accounting irregularities and related implications on the company’s liquidity and financial profile following its failure to publish the already postponed audited consolidated accounts for 2019.”

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Closing at £23.37 per share on Friday, Wirecard is now more than 75% down year to date in the stock market. It is valued at £2.84 billion and has a price to earnings ratio of 6.59.

Wirecard’s market value dropped by £9.05 billion in two days

Things went haywire for Wirecard last week as its internal auditor, Ernst & Young, refused to approve its 2019 accounts on a massive discrepancy of £1.7 billion. Earlier in 2020, an external probe by KMPG had identified the missing money in May.

On top of that, two Philippines banks, BDO and BPI, also allege the German fintech company of forging documents. The two banks denied on Friday morning that Wirecard was ever a client. The series of unfortunate events resulted in a roughly £9.05 billion of decline in Wirecard’s market value in two days.

The accounts scandal resulted in the termination of £1.80 billion worth of loans. Consequently, the urgent financing needs for Wirecard prompted it to partner with Houlihan Lokey to devise a new strategy.

Wirecard’s CEO Markus Braun announces resignation

Amidst all the struggles, CEO Markus Braun of the payments company announced his resignation on Friday. Wirecard replaced Braun with James Freis as the interim CEO. Freis has previously served at Germany’s stock exchange as a compliance officer.

VEB (Dutch shareholder group) also commented on the events of Friday and expressed plans of seeking compensation from EY. As per its statement:

“EY has played a significant role in the whole Wirecard scandal, not only from its inability to detect the flaws in Wirecard’s escrow account in former years. Just when EY should have played a protective and clarifying role, it left the shareholders out in the cold.”

EY said on Saturday that it has not received a notice of legal action from VEB so far but declined to comment any further.