The former darling of the German FinTech scene, Wirecard has collapsed into insolvency following revelations of a multiyear accounting fraud.
Wirecard announced in a regulatory statement that it faced “impending insolvency and over-indebtedness”. It is the first insolvency of a member of Germany’s Dax index of blue-chip companies in its 32-year history.
Wirecard shares, down 90% in the last week, were suspended for one hour shortly before the company’s announcement that it will file an application for insolvency at the Munich district court. The unravelling began a week earlier, when Wirecard announced that €1.9 billion of cash was “missing” and it could not file accounts, prompting urgent negotiations with the banks owed €2 billion.
A further €1.4 billion of debt, issued in September last year, is also outstanding. The insolvency puts the future of Wirecard Bank, a fully-owned subsidiary of the group, in doubt.
Germany’s financial watchdog BaFin earlier this week appointed a special supervisor in an attempt to ringfence the lender — which has €1.9 billion in total assets and is a member of the deposit protection scheme of the Association of German Banks — from the stricken group. Wirecard said it was “currently evaluating whether insolvency applications have to be filed for subsidiaries”.
The dramatic collapse caps a turbulent 18 months spent fighting whistleblower allegations of accounting fraud reported by the Financial Times.
In 2018, the last year for which accounts are available, the group claimed to process €125 billion worth of credit and debit card transactions, on which it generated €2 billion of revenues. As much as half of those sales appear to have been fabricated, according to a KPMG report on a special audit of the group published in April, and documents reviewed by the Financial Times.