By
Godfrey Benjamin
March 28th, 2024
Ernst and Young indicated that as much as €1.9 billion in cash is missing from the Wirecard’s balance sheet. Wirecard management is working with the auditor to clarify the situation.
Wirecard AG (ETR: WDI) stock price has fallen by more than 70%. This occurred as accounting firm Ernst & Young indicated that there is now evidence for the € 1.9 billion cash balances on trust accounts. This is about 25% of the company’s balance sheet.
The accounting firm said:
“There are indications that spurious balance confirmations had been provided from the side of the trustee respectively of the trustee’s account holding banks to the auditor in order to deceive the auditor and create a wrong perception of the existence of such cash balances or the holding of the accounts for to the benefit of Wirecard group companies”.
“The Wirecard management board is working intensively together with the auditor towards a clarification of the situation,” added experts.
At the time of filing this report, Wirecard (WDI) stock price was 30.88 EUR (-70.44%). This situation has sent Wirecard (WDI) stock prices into a tailspin. Investors have had to put up with allegations of financial impropriety at the company for years.
Wirecard (WDI) Stock Price Takes a Hit
The Wirecard ( WDI) stock price drop is the worst in the history of the Frankfurt Stock Exchange. Bonds issued by the company have also suffered steep losses. Wirecard AG (WDI) CEO Markus Braun has been CEO since 2002. He is also the payment services company’s largest shareholder.
Braun has defended the company. He has claimed that the company is a victim in this scenario.
He further said in a statement:
“It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred,”
The CEO also indicated that the company will be taking legal action against several individuals who have been named at this point.
Loans Could Be Called In
There is also the issue of loans. Loans of up to $2 billion could be terminated if the audited accounts aren’t published by 19th June 2020.
In the absence of the missing cash, Wirecard AG (WDI) has just about €220 million in cash according to analysts.
Analysts think that this could be a watershed moment for the company. The general opinion is that the company will not survive the fallout from this situation.
This may have pointed to calls of impropriety by the payments firm. The financial times had in a series of articles pointed to inflation of the numbers and forged contracts by the company’s Singapore office. In another article, Staff at the Dubai office had allegedly inflated sales and profits at its Dublin and Dubai subsidiaries.
This further fuelled speculations of improper corporate governance practices at the payments company. Wirecard’s market cap has fallen from a €24 billion to just around €4 billion.
While there will be legal and criminal investigations into the missing funds, these allegations serve as a reminder that public companies have a responsibility to the investing public. Something that many companies who have fallen along this route failed to observe.