German-based payments provider Wirecard, which just a week ago was valued as one of the top 30 companies listed on the prestigious DAX stock index, has filed for insolvency. The move towards insolvency comes after an independent auditing firm discovered there was €1.9 billion missing from Wirecard’a cash. As a result, the company’s chief operating officer Jan Marsalek was suspended, while Wirecard’s CEO Markus Braun was arrested on fraud suspicions and later released on €5 million bail.
With the scandal heavily affecting the viability of Wirecard’s future, the company has decided to pull the plug and file for insolvency in a Munich court. The company has approximately €1.3 billion worth of loans due next week, and it is unclear if or how those debt obligations are going to be fulfilled. Prior to the scandal, Wirecard’s valuation was sitting at $28 billion; however, once auditors discovered that a potential fraud had taken place with the missing €1.9 billion, the company’s shares fell by 98%.
Now, creditors are becoming increasingly worried about recouping the money owed by Wirecard. A total of €3.5 billion was borrowed from creditors, with Wirecard borrowing €1.75 billion alone from 15 different banks, and has issued €500 million in bonds. After the auditing firm refused to sign off on Wirecard’s 2019 accounts over suspicions of a sophisticated fraud, Braun later did admit that the missing money most likely is non-existent.
Information for this briefing was found via Reuters and MarketWatch. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.