Wirecard the Germany payments outfit and DAX 30 constituent was supposed to have released its twice previously delayed 2019 results today. Instead the company issued a statement saying that the Annual Report would need to be further delayed as their auditor E&Y could not verify whether previously reported cash balances of €1.9bn could be verified.
What has amazed us is how the Wirecard share price has been so impervious to substantiated accusations of wrong-doing for so long. Even today Wirecard’s long standing CEO Marcus Braun has brazenly tried to portray the company as a victim of fraud and instead tried to focus investors on apparently strong reported revenue growth. If the cash balances are non-existent then logic would also suggest that current trading is equally fictious.
During our Q1 conference call we previously described the company as “having more red flags than you would see at a communist rally”. This morning the stock was our biggest short position. The share price of Germany’s previously most valuable financial company just halved in a few minutes. Moreover, with Wirecard’s borrowings dependent on an audited 2019 Annual Report being released by June 19th we believe that the company may now be declared insolvent by the weekend.
In March, we wrote a blog https://blog.argonautcapital.co.uk/articles/2020/03/27/in-defence-of-short-selling/ noting how short-sellers were uniquely motivated to “unmask fraudulent management and expose poor business models”. We noted the collapse of NMC Hospitals earlier this year, which was another top short position for the fund, and also questioned why the German financial regulator had previously leaped to the defence of Wirecard as somehow in the German national interest. We suggested that far from being the “pantomime hedge fund villains of Mayfair…if there are no short-sellers to play the role of market vigilante, we would inevitably have a more dishonest stock market. In the absence of shorts, capital would be allocated less efficiently and over the long-term economic growth would suffer”.
Barry Norris
Argonaut Capital
June 2020