Wirecard is a German payments company and its shares have fallen by more than 60% after the auditors from Ernst & Young had raised questions over cash balances worth €1.9bn last week.
Wirecard stated that there were indications that the trustee to the accounts had attempted “to deceive the auditor and create a wrong perception of the existence of such cash balances”.
The scandal at Wirecard has already had serious consequences as the CEO Markus Braun resigned with immediate effect.
Wirecard has been subject to two audits just recently. The regular audit was carried out by mentioned E&Y, and the special audit that was carried out by KPMG earlier this year following accusations of fraud.
Markus Braun, CEO Wirecard states: “We are in contact with the trustee present on site. Previously issued confirmations by the banks were no longer recognised by the auditor. All parties involved are endeavouring to clarify the matter as quickly as possible. It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred. Wirecard AG will file a complaint against unknown persons.”
Now Wirecard has called in investment bank Houlihan Lokey to assess its financing options after admitting that “there is a prevailing likelihood that the bank trust account balances in the amount of EUR 1.9 billion do not exist”.
Wirecard fell 49% at 9.05am in Frankfurt trading, bringing losses over the past three trading days to 87%.
The missing cash “could trigger an event of default and allow creditors to withdraw lines of credit”, said Justin Tang, head of Asian research at United First Partners in Singapore. Wirecard has an outstanding revolving credit facility of €1.75 billion, according to data compiled by Bloomberg.
The mystery over the lost money has a connection to two Philippine lenders after Wirecard said a couple of unnamed Asian banks had been unable to find accounts with the cash.
But both the Bank of the Philippine Islands and BDO Unibank Inc claim Wirecard was not a client and they had not seen the money. None of the missing cash entered the Philippine financial system, according to the nation’s central bank, which is conducting its own investigation.