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Yesterday, Wirecard shares plummeted, losing 60% after the news about the accounting scandal broke on Thursday. The losses continued today. Wirecard CEO Markus Braun has resigned.
The recent accounting scandal that hit Wirecard AG (ETR: WDI), the German payment company, has claimed its first victim. The firm announced on Friday that Markus Braun, its chief executive officer (CEO) has resigned. The resignation which took immediate effect entrusted the Wirecard leadership on interim CEO James Freis.
On Thursday, the management of Wirecard announced that auditors from Ernst & Young discovered that 1.9 billion euro ($2.1 billion) was missing from the company coffers after auditing its books.
Wirecard shares have since plummeted, losing 60% after the news broke on Thursday. The losses continued on Friday dropping further by 35%.
The inability to balance its books is responsible for the recent postponement of the release of its 2019 annual report which has been rescheduled four times since this year.
Wirecard CEO Resignation
The crisis facing the company exposes it to bankruptcy with creditors poised to call in their loans. The situation could deteriorate with close sources saying that insolvency would be the outcome if its $2 billion loans are called in.
The news of Braun’s resignation temporarily halted the losses but not enough to end the downward trend.
The company’s accounting malpractices were made public after Financial Times reported that the payment processing firm was cooking its books by forging contracts and revenues at its Singapore office. The report also stated that the firm’s Dubai office was inflating sales and revenues to deceive auditors.
Wirecard denied the FT reports and threatened to sue the media which it accused of collusion with short sellers, but a third-party investigation by the law firm RPC found no evidence of such conspiracy.
Although the company could not be reached for comments on Braun’s resignation, a video seen by reporters showed Braun saying Wirecard may be a victim of an elaborate fraud which he termed “considerable”.
After Wirecard accounting practices were flagged, the company claimed that the missing funds were in two Asian banks. The banks, BDO and BPI in a response to the claims stated that they have no relationship with Wirecard.
Braun has been at the helm of affairs at Wirecard for 18 years. He resisted calls to resign when some investors expressed dissatisfaction with the company’s financial records.
Freis who is taking over as the acting CEO was the head of compliance at Deutsche Börse, the stock market exchange operator. He was to join Wirecard as chief of compliance before the resignation was announced on Thursday.
Bafin, the German financial regulator has already opened an investigation against the company. Early this month, Wirecard offices were searched by authorities.