“Europe Alipay” Wirecard files for insolvency. Is there any hope after fraud?

Third-party payment companies are popular all over the world. The two major payment companies in China domestic are Alipay and WeChat Pay. And in Europe, the German payment company Wirecard, which is a third-party payment company, is known as the best representative of the German fintech company and has the title of “Europe Alipay”.

Wirecard was founded in 1999 and its business is global electronic payment, with nearly 6,000 employees in 26 countries around the world. It was established a few years later than Alipay, but its development in Germany is relatively fast. Its operating income reached 2 billion euros in 2018, which could be said to be a unicorn in the financial technology industry.

After the listed, Wirecard’s stock price rose all the way. The stock price once reached 200 euros at its peak. And the total market value once reached 24.6 billion euros (195.1 billion yuan), which exceeded the old financial company Deutsche Bank. Due to its excellent performance, it was included in the German Der Dax and was abreast of the companies such as Volkswagen, Siemens, and Deutsche Bank.

Financial fraud

On June 18th, Wirecard announced for the fourth time that it would postpone the 2019 annual report disclosure date. At the same time, Ernst & Young, which is responsible for the audit of Wirecard, said that Wirecard could not provide evidence of the 1.9 billion euro bank deposit balance in the financial statement trust account. The accounting firm refused to sign its annual report and Wirecard was suspected of financial fraud.

Wirecard subsequently admitted in an interim announcement. “There is a high probability that the €1.9bn of bank balance in the trust account does not exist.” In other words, it means that nearly a quarter of the company’s assets only exist in the paper.

After the Wirecard financial fraud scandal being exposed, it brought a big reaction in Germany. Wirecard’s stock price plummeted, and the decline once exceeded 70% to 29.9 euros.

Later on, Wirecard CEO Markus Braun resigned on the 19th. On the 22nd, the company’s share price fell to 12.99 euros. On the 23rd, Braun was arrested but allowed to be free after paying 5 million euros of bail Restricted freedom. The stock price rebounded on the day, closing at 17.16 euros.

Wirecard’s stock price has fallen to 1.28 euros up to now. The stock price has plummeted 98.7% compared with the 104.5 euros on June 17. It can be directly negligible relative to the beginning of the year at around 130 euros.

After financial fraud, stock price plunge, and CEO arrest. on the evening of the 25th, the German court in Munich confirmed that it had received Wirecard’s bankruptcy application. Euro debts can only be filed for bankruptcy.

15 banks stepped into landmines

Earlier in the week, Wirecard was discussing the next steps regarding a 1.75 billion euro loan with Dutch Bank, Commerzbank and ING Group, which had already been disbursed by about 90%.

In addition to these European banks, Bank of China unfortunately faces this landmine. On June 23, some media said that the Bank of China may offset most of the 80 million euro loan owed by Wirecard and will not extend the credit.