Wirecard Tumbles as Questions Remain After Special Audit -- Update
By Paul J. Davies
Shares in German electronics-payments giant Wirecard AG dropped
more than 26% on Tuesday after a special audit reviewing
allegations about some of its accounting practices left unanswered
Wirecard, which has been celebrated as one of the biggest and
fastest-growing European fintech companies, also said it wouldn't
report its already delayed full-year 2019 results on Thursday. The
company said it would complete its ordinary audit of 2019 results
with its main auditor, E&Y in Germany, as soon as possible
given the restrictions related to the coronavirus pandemic and the
completion of the special audit by KPMG.
The German company has faced questions over aspects of its
accounting for several years from hedge funds that bet against the
company's shares as well as from media. Allegations of falsified
transactions in its Singapore division led to an investigation by
the Singaporean police's financial arm, the Commercial Affairs
Division, which has yet to complete its probe.
The fintech company published the report by KPMG in German. It
included some caveats, saying Wirecard didn't deliver all the
documents requested by the auditor or delivered them several months
later. It also said almost all documents submitted were electronic
copies and couldn't be verified.
"Due to the lack of available documents or IT system access,
some of the original investigative actions brought to the client's
attention at the beginning of the investigation could not be
carried out or could not be carried out in the manner originally
intended," the KPMG report said.
"It is clear that KPMG still has work to do, many questions
remain and the report does not give Wirecard the clean bill of
health it hoped to receive," said Neil Campling, an analyst at
Mirabaud Securities in London. "Information was withheld from KPMG,
access to key contacts was postponed and authenticity of documents
couldn't be verified."
The main area of investigation was into Wirecard's relationship
with three third-party acquirers, which process payments on behalf
of Wirecard customers. KPMG said that these partners accounted for
the vast majority of sales of three Wirecard divisions and a major
part of earnings before interest and tax for the group.
However, it added that there had been a lack of cooperation from
these partners and KPMG had been unable to trace or verify any of
the underlying transactions for the period it was investigating,
2016 to 2018. "KPMG can...neither make a statement that the sales
revenue exists and the amount is correct, nor make a statement that
the sales revenue does not exist and the amount is incorrect. In
this regard, there is an obstacle to investigation."
Wirecard said in a statement Tuesday that "no incriminating
evidence was found" regarding the accusations of balance-sheet
manipulation. There have been no findings that would require a
correction of the annual financial statements for 2016, 2017 and
2018, it said. KPMG sees no further need for an audit of Wirecard's
business activities in Singapore beyond that done for its 2018
annual report, it added.
The Singapore allegations, first reported in the Financial Times
in January 2019, put the group's shares under pressure. By early
February of that year, the stock was down nearly 50% from its peak
in September 2018.
In April 2019, the company announced a $1 billion investment
from Japan's SoftBank, one of the world's most prolific technology
investors. That lifted Wirecard shares 8.5% on the day it was
announced. However, it later turned out SoftBank itself had put no
money into the company.
The company's board ordered a special audit in October of
allegations related to its Singapore operations as well as
questions linked to a 2015 acquisition in India and its lending
operations in Brazil and Turkey. Its longstanding chairman, Wulf
Matthias, initially resisted calls for such a review from analysts
and investors. He quit his role in January, while the company
pledged to improve corporate governance.
Write to Paul J. Davies at firstname.lastname@example.org
(END) Dow Jones Newswires
April 28, 2020 13:58 ET (17:58 GMT)
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