By Douglas Busvine
BERLIN (Reuters) – German payments company Wirecard said that its auditor had refused to sign off on its 2019 accounts, sending its shares 60% lower on Thursday as it warned the delay could mean billions in loans are called in as early as Friday.
Wirecard said that auditor EY had informed it that sufficient evidence could not be found for 1.9 billion euros ($2.1 billion) in cash balances on trust accounts – or around a quarter of its balance sheet total.
There were indications, Wirecard added, that these balances were “spurious” and had been provided “in order to deceive the auditor”.
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.
“The Wirecard management board is working intensively together with the auditor towards a clarification of the situation,” Wirecard said in a statement.
Wirecard warned further that, if it cannot provide certified annual and consolidated statements by Friday, this would allow approximately 2 billion euros in loans to be terminated.
Wirecard’s inability to finalise its 2019 financial year threatened a debacle for the Munich-based fintech, which was founded in 1999 and rose to win promotion to Germany’s blue-chip DAX index in 2018.
The company has been a regular target of short sellers who question its financial reporting. They responded by sending Wirecard’s shares down by 60% in Frankfurt trading, wiping nearly 8 billion euros off its market worth.
“The writing was on the wall – after KPMG everyone should have become aware that there are problems,” a Germany-based independent trader said.
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 2016-18, KPMG said it had been unable to verify the existence of 1 billion euros in revenue 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 Wirecard’s CEO Markus Braun. Hohn followed up by filing a criminal complaint with the Munich prosecutor.
German financial watchdog Bafin, which had previously suspected short sellers of colluding to manipulate Wirecard’s share price, has finally shifted its attention to the company and launched multiple investigations.
Prosecutors raided Wirecard’s headquarters in a Munich suburb on June 5 and opened proceedings against the company’s entire management board as part of the market manipulation probe that was initiated by Bafin.
Wirecard has said it was cooperating with the investigation and the allegations against it were unfounded.
($1 = 0.8892 euros)
(Reporting by Douglas Busvine in Berlin and Thyagaraju Adinarayan in London; editing by Mark Potter and Keith Weir)