Wirecard – the “German Enron” & a very personal history 2008-2020

For those who just came back from a 15 year space mission: Wirecard is a German  company that according to its website is ” one of the world’s fastest-growing digital platforms for financial commerce”. It managed (briefly) to achieve a market cap of close to 25 bn EUR and is part of the German Blue Chip index DAX 30. The stock lost -62,71% today which is most likely a record for a DAX company for a single day.

Backstory / Personal history 2008

This is an article I wanted to write for a long time but I was actually afraid to do so for several reasons.

Wirecard is a company/stock that I have been following for a very long time. My first “encounter” with the company ended in a kind of “5 minutes of fame” situation with some very unpleasant side effects.

The story starts in May 2008 when a post appeared under the pseudonym memyselfandi007 on Wallstreet Online, the largest German stock community/forum. (fun fact: This Thread seems to have been read 17,8 million times, so a lot more than all my blog posts on V&O combined….).

The post has been redacted/censored substantially but in essence the issues back then were the following:

  • intransparent reporting (back then no payment volumes were reported, the structure of the report did not reflect the business, some cash flow items were reported in the wrong category etc., it was never clear what cash actually belonged to Wirecard and what was customer’s money)
  • strange M&A activities toward year ends
  • aggressive profit accounting (“too good to be true”)
  • continuous capital raising despite reported profitability and “available cash”
  • involvement of the CEO and the former head of the supervisory board in a dubious company/bankruptcy (a bankrupt company called 10tacle)
  • rumors that the company was “money laundering” Online gambling profits for US citizens
  • in summary, the company looked like a very dubious, low quality organization. The original post contained the German expression “Bumsbude”….

Wirecard directly tried to block anything negative and if one reviews the threat, some of memyselfandi007’s subsequent postings have been deleted despite only stating facts. Memyselfandi007 finally got kicked out of the forum.

What happened next was even more interesting: A guy called Markus Straub copied this post and published it in a financial newsletter as a short recommendation under his name. This financial publication was/is (?) part of a shareholder organisation (SDK) that claims to protect share holders. It seems that he and a hedge fund friend of him shorted stocks before publishing the short reports and he seems to have done this with others stocks as well. For this he had finally go to jail for market manipulation. But even  still in 2008, Wirecard tried to aggressively sue everyone even only remotely connected, even the poor memyselfandi007, who only had written this fact backed post in this stock forum and had nothing to do with the subsequent publication and market manipulation.

The scandal back then hit even the front page of the major German financial magazine Handelsblatt and the anonymous blogger memyselfandi007 was mentioned as the starting point of the whole scandal (and got his five minutes of anonymous fame).

In between however, memyselfandi007 had the quite unpleasant surprise to be called directly at his work place by the German Criminal Police (similar to the FBI) and asked to show up in the Criminal Police HQ the very next day. Luckily, the police officers were quite friendly and at the end concluded that memyselfandi007 was just a witness with no relationship to anyone else although they didn’t mention this when they called him. They also mentioned that Wirecard desperately wanted to know who this memyselfandi007 was to sue the shxx out of him, but the police didn’t pass on the real identity.

Interestingly no one cared back then if the clearly observable issues at Wirecard were valid or not, both the police and the press only concentrated on the market manipulation of the evil short sellers

One little success back then was that Wirecard actually republished their annual report, correcting some of the more obvious mistakes that memyselfandi007 mentioned. However as a result, the report became even more intransparent.

Wirecard also tried to sue any other forum where memyselfandi007 was active and potentially negative things were written about the company.

The result of that episode was that poor memyselfandi007 was pretty scared to publish anything against the company but was convinced that the company was a fraud.

2008-2018

During the following 11 years, every other year, some reports from short sellers surfaced that shed light into some of the issues Wirecard had. Interestingly this only lasted for days and weeks and the share price always recovered.

Wirecard then smartly rode the fintech/payment wave and actually managed to build some real businesses on top the rotten core. memyselfandi007 followed the company but  the reporting remained opaque and they never really explained how they make their money.

Based on their transaction volume, Wirecard was multiple times more profitable (on paper) than direct competitors. No one knew how they did it. One theory was that they were active in more “risky” areas such as online gambling and porn sites but no one cared as long as reported profits and the stock price went up.

2018 – DAX

The peak of this whole story in my opinion is that Wirecard made it into the Germany DAX 30 in September 2018. The stock syk-rocketed as we can see in the chart:

Wirecard chart

At its peak, this piece of shit company was “worth” close to 25 bn EUR.

2019 – FT – Dan McCrum / BAFIN

One of the very few persons who had the guts to openly criticize Wirecard was Dan McCrumm, who via FTAlphaville published some critical articles who were very well researched. If I am not mistaken, the earliest articles were published in 2015 before more substantial coverage came in in 2018 and 2019.

In typical fashion, Wirecard reacted in suing McCrumm and managed taht even the German regulator BAFIN to go after McCrumm as a market “manipulator”.

Nothing came out of this other that an official short selling ban for a period of time. Interestingly again, no one from BAFIn or the Police actually bothered to look at Wirecard itself. Personally, the FT for me gained “hero status” to not back down despite the massive effort to discredit them.

April 2020 – The KPMG report

In 2019, the boss of the supervisory board hired KPMG mainly to independently confirm that everything is splendid at Wirecard (E&Y is the auditor of Wirecard). This is the summary from Wikipedia:

In 2019, KPMG was hired by the German payments company for an independent audit to address the mentioned allegations. Wirecard claimed that KPMG concluded that no discrepancy was determined during the audit.[61] However, on April 28, 2020, Wirecard shares tumbled 26% when its auditor announced that it did not receive sufficient documentation to address all allegations of accounting irregularities.[62] Then on June 5th Wirecard’s headquarters was searched by police as part of a criminal investigation into potentially misleading statements to investors by CEO Markus Braun and three other board members regarding the audit.

I actually read the report in full and it was unbelievable. KPMG were denied access to most information and what they saw raised all alarm bells available. Any person familiar with the big 4 would understand that the language that KPMG used was so strong that there is now doubt that something was VERY wrong at Wirecard. The Wirecard statement just shortly before the release in my opinion was clearly a criminal act. My personal highlight of the report was an M&A transaction where Wirecard bought a company in India from an SPV for 300 mn USD that was acquired just one month before for 30 mn USD. Wirecard claimed that they didn’t know who the ultimate beneficiary of the sales price was. If I ever have seen something looking like explicit money laundering at a DAX company then it was this transaction.

Why I never shorted again

I have to confess that I was short the stock in 2008 but then never shorted again, even not after the KPMG report. The issue was that although I knew it was a fraud, the company got away with everything. There were enough stupid analysts/investors who didn’t care at all if the company was a fraud or not, as long as the share price kept rising. It was just impossible to tell when the company would go bust, especially as the management seemed to have an endless criminal capability. Combined with my obvious inability to time investments I decided not to short again since 2008.

Lessons to be learned

  • even a pretty obvious fraud can go on much longer than one would think if the organizers are ruthless enough. My original short position would have gone against me 25x over 12 years and the share price even after today’s disaster would be higher than back in 2008 (just to be clear: the company is worth ZERO in my opinion)
  • a company that goes against people who write negative articles as aggressively as Wirecard has something to hide
  • if the profitability of a business can not be explained by its business model, then most likely something is very wrong (greetings Bernie Madoff)
  • 99% of professional investors and analysts don’t care about these things even if you tell them. A lot of people knew that the company was fishy but hey thought they can make many anyway and a lot of people made a lot of money over the years
  • Small companies with far flung operations in difficult geographies should be avoided (see Globo Plc) as this makes fraud difficult to detect for auditors
  • A big 4 Audit firm is no proof of quality.
  • The German BAFIN is not very smart and German financial regulation is substandard
  • Short sellers are smart but are easy targets for fraudulent companies as the public doesn’t understand their function

Summary:

Overall I do think that it is very positive that this epic fraud has come to an end. It will be interesting to see if and who gets convicted. Personally I also find it interesting how some professional analysts and investors (hello DWS and Mr. Tim Albrecht…) will justify their part in this.

I guess the regulated part (i.e. the bank) will be rescued but the stock is fundamentally a clear zero. Although these days stocks who file for bankruptcy seem to be hot investments.

As a very funny side story, Wirecard now claims that they themselves have been defrauded but I guess that is a pretty weak defense.

I deeply hope that a good journalist will write a book about this and that they will make a movie about this “German Enron”.

 

 

96 comments

  • For me that pile of shit smelled like fraud a long time ago too. Im really angry about one thing. The prosecutor got all information from Moody Waters and financial times 2-3 years ahead. Did they ever look at this ? In my eyes the „Staatsanwaltschaft“ itself has to be prosecuted and all the guys who lost money should indict and bring the law to the prosecutor himself. What was not clear about what Moody said years ago ??? This guy didnt to the job. Who was the Staatsanwalt at that time ? Get your money back from this guy. I guess you guys follow this better. But did any go this route ? in no press article i read about how the staatsanwaltschaft failed so hard 2-3 years ago. no word about it. the press is a total joke. investors beware. see u

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  • Can’t wait for the movie! it should be called “Everything is possible”, like the text Marsalek sent to his confidant on one of the final days.

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  • Great story ! Congratulations for your 2008 analysis !

    As suggested by others already, please try to make this into a book !! (Michael Lewis and Dan McCrum were already suggested, FT’s Olaf Storbeck is also writing about Wirecard as well at the moment)

    A lot of retail investors got burned by Wirecard – a book about a short seller spotting this already 12 years before would be great to improve the image of short sellers in Germany immensely (unfortunately German investors’, media’s and institutions’ first response is “Short Selling Attacken”)

    One way to get media exposure (if you want to) you could try is contact *Realvision* (https://www.realvision.com/) – they had similar interviews with (US) short sellers who were similarly harassed. Maybe they will make a special about Wirecard and I guess they’d be interested to have interview partners for this.

  • I’m really glad that you wrote sceptical articles/comments about them in the past, although I didn’t know the police story 🙂 Anyway these were enough for me to stay away from Wirecard. I also showed them (your articles/comments) to a friend of mine but he was more like ‚they’re a DAX company‘ and ‚I trust the authorities. They said everything is fine.‘. And now we have the salad 🙂

  • Hello, great story and a bit heartbreaking, too. Your „moment of fame“ was mentioned in a long background story in today’s edition of Wirtschaftswoche. So your fame lingers on. Well deserved! Best and keep on going, Christoph

  • Nach FlowTex, Schneider, Cum-Ex und nun Wirecard, zeigt sich wie gut das Bafin und die Big4- Testate sind …

  • Incredible story. Maybe next Michael Lewis book!

  • Jetzt sitzt dein “Freund” im Knast 😀

    “Im Bilanzskandal beim Dax-Konzern Wirecard ist der ehemalige Vorstandschef Markus Braun festgenommen worden. Das teilte die Münchner Staatsanwaltschaft am Dienstag mit.”

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  • Equity Investor

    Also famous “undervalued shares” praised your work with a blog post :

    https://www.undervalued-shares.com/weekly-dispatches/a-few-thoughts-on-wirecard/

    Great work – like most of your blogposts, I enjoy reading since years. Thanks for it!
    Patience seems to be a real undervalued investment skill, but you showed much of it once more.

  • Merci beaucoup for sharing your incredible experience about this German Enron.or German LetsGowex!
    I am personally not fond of short sellers who make allegations and then short stocks but memyselfandi007 did not short Wirecard proving an honest and disinterested whisleblowing.
    Seems that Integrity does not pay on German financial markets.Memyselfandi007 should make an official complaint against Bafin or the German Forum for unjustified moral pressure .(Not sure about the legal term in English but in French it s called „Prejudice Moral“

  • DAX ist not a blue chip index, but the index of the 30 biggest German companies, no matter what they do. Which makes the case of Wirecard much more serious.

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  • Larry.Livingston

    I remember your thread in Wallstreet Online, very good call! 🙂
    Did not know the police background story. That’s shocking!

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  • Congratulations. Great story. I’ve put a link to your post on my blog. https://brucepackard.com/a-quick-thought-on-wirecard/ I’ve met Dan McCrum a few times, I’m sure if you email him you could arrange to meet up if you’re ever in London.

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  • Fantastic story, I am shocked to hear that those violent practices by the company were already in place in 2008! Unbelievable. Personally, I find companies with increasing profitability AND capital needs in supposedly capital light industries as problematic. Also, Wirecard did a backdoor IPO (according to Wikipedia), another problematic practice if combined with all the issues you mentioned back in 2008.

  • Thanks, great article. Wirecard so hyped that even newbies took credits. If I’d be invested in this company, my own red alarms would be going on by the very little fact that agm were postponed many times. This is very fishy. Anyway, good luck to you!

  • I wish you would have made money on it. You did epic work!

  • Great post and well done on being one of the very first to identify the fraud!! Curious which listed company you have similar accounting concerns about today?

  • Guter Artikel, danke. Ich habe mir den KMPG Bericht, die Interpretation bzw. Antwort von Wirecard auf den KMPG Bericht und die letzten Jahresabschlüsse durchgelesen und bin der Meinung, daß man bereits seit geraumer Zeit den dezenten Leichengeruch, der aus dem Unternehmen kam, hätte wahrnehmen könnnen. Meine Frage als noch relativ junger Anleger ist, wie man so eine Meinung umsetzt: Daß hier etwas faul war, ist klar; aber wie bekommt man das Timing hin ?

    • Ehrliche Antwort: ich habe keine Ahnung

    • In this case, the reputation of the auditor (or what is left if it) was a big lever for calling the fraud. If you wanted to be successful in shorting Wirecard, you somehow should have become active in making the big guys at the auditor aware what they are signing off. Maybe that actually happened?

    • @FTT
      Der erste Punkt wäre überhaupt viel mehr allgemeine Recherche zu betreiben.
      Den meisten geht es doch so, dass ohne Grund (meist wenn es zu spät ist) keiner bereit ist den KPMG Bericht zu lesen.
      Du musst also solche Berichte lesen, bevor offensichtlich wird, dass etwas faul ist.

      Das Problem dann ist, dass du dir eine Meinung bilden musst und dich nicht beinflussen lassen darfst.
      „Die Masse“ fand den Bericht nämlich toll und hat ihn für die Argumentation Longpositionen auszubauen genutzt.

      Du brauchst also den dickes Fell, um alleine mit einer von der Masse als unpopulär betrachteten Meinung dazustehen.

      Und dann hilft dir wie memyselfandi007 schreibt nur ein extrem langer Atem (Jahre?) und ein massive Bankkonto.

      In solchen Fällen zu shorten (ausser vielleicht in der Bewegung, wenn deine Meinung plötzlich von den Medien geteilt wird) ist schwierig und wahrscheinlich im Verhältnis zum Risiko für den Normaltrader nicht sinnvoll.

      Aber und das ist aus meiner Sicht viel wichtiger, du konntest Wirecard aus deinem Langfristdepot heraushalten und Verluste vermeiden, wenn du dir eine fundierte Meinung gebildet hast.

      Ausserdem findest du bei solcher aktiven Recherche von vielen Firmen auch Firmen, die unterbewertet sind und von der Masse / den Medien noch nicht entdeckt wurden.

    • Das Timing war fukking einfach. Als ein DAX Unternehmen nicht in der Lage war die Bilanz pünktlich einzureichen hättest Du shorten sollen und müssen. Und schau mal wo der Aktienkurs war. Meine Freunde kannst fragen, denen hab ich es gesagt :). Mensch. Hast Du jemals von einem Unternehmen gehört. börsennotiert was die Zahlen über Monate nicht hergeben kann ? LÄCHERLICH. spätestens da. War alles klar. 100% short short. Gib Ihm

  • Imagine MarkusBraun would wear a crown and be the Head of a State, living in Madrid. With his friends, family & acquaintances ruling a country. Result would be a de-facto cleptocracy, an abominable country lead by extractive elites (basically stealing as much as possible from the people). And the Padrino of such a mafia cashing in millions for his services to the regime. (like 100 M$ received from opaque Saudi accounts, managed by those of the “Kashogi job”).
    If MMI’s story would have occurred in Spain, the poor MMI would now be either in Prison, or living in exile in Belgium.

  • Imagine MarkusBraun would wear a crown and be the Head of a State, living in Madrid. With his friends, family & acquaintances ruling a country. Result would be a de-facto cleptocracy, an abominable country lead by extractive elites (basically stealing as much as possible from the people). And the Padrino of such a mafia cashing in millions for his services to the regime. (like 100 M$ received from opaque Saudi accounts, managed by those of the „Kashogi job“).
    If MMI’s story would have occurred in Spain, the poor MMI would now be either in Prison, or living in exile in Belgium.

  • Thanks alot for the great article. Do you have any views on wordline acquisition of ingenico. I remember that ingenico used to be shortseller’s favorite stock before deal announcement. Unrelated to this, do you have any views on unibail (commercil REIT) sector. It has gone down alot recently. Thanks alot again !!

  • The diligent investor

    Excellent read, thanks for sharing the insides. I understand your position and shorting is always VERY delicate.

    Looking forward to see how the share price develops.

    I am currently short Uber (not a fraud, just almost a 0 in terms of business value) and Tesla (partial fraud, maybe not a full 0 in terms of business value) and can confirm your above statements. It is not easy to short, even if your logic/approach is sound and if the facts are on your side. There are many people out there that do not care for facts and one needs a long breath.

    Anyways, one must always stay true to oneself! You did that. Great job and good luck.

    • As John Maynard Keynes (supposedly) said of shorting, “the market can stay irrational longer than you can stay solvent,” which is why I don’t touch it, despite agreeing with your general assessments of Uber and Tesla.

  • Hi, Unfortunately i lost my childs savings for their education. I usually dont ask these kind of questions as advice but there is no shame on that after point. Should i keep my hope to gain some of them back? or are the stocks gonna be a toilet paper? Thanks.

    • Yorgi, i am very sorry to hear that. I am Not allowed to give you any advice, but if you read the post in full you will find out what i assume as the “true value”. In between anything can happen.

    • bonjourhamburger

      Same here: Bought-in just 5 min. prior to the 60% price-collapse on thursday. Kids will have to do without college…
      „Should i keep my hope to gain some of them back? “ Since I fell for their trick too, I may be the least reliable source but IMHO bancruptcy is possible, even more so than a possible remaining inner-value of the few functioning businesses they operate (Aldi as a customer is certainly paying *something*…)
      I’m bracing for a law-suit.
      Not sure yet which to pick:
      – Should I participate in one of the German class-action suits or would it be wiser to join US ones?
      – The original Enron has only paid 10% of the incurred losses back to victims … and it took over a decade.
      – I wonder if a law-suit against the BaFin or E&Y would be more promising? Both enabled this and both have more sufficient funds/recurring income to actually pay for their wrongdoings…

      • The only winners of these lawsuits are the lawyers in my experience.

        • Ich würde abwarten. Bis jetzt wärst ja mit deinem Short aus 08 immer noch in den Miesen und ein 60-bagger verpasst. Vllt. liegst ja wieder (erstmal) falsch? 😀

          Immerhin scheint es ja mal reele Kunden zu geben. Somit keine 2. Flowtex …

          Heute kam eigentlich nichts neues raus und wieder -40%. Man liest auch keine Kleinanleger-Zocks mehr. Mich wundert, dass der neue CEO den Job angetreten hat. Bisher hat der einen guten Lebenslauf.

          Bin mal gespannt wie es weiter geht.

        • bonjourhamburger

          Thought so, but then: isn’t some compensation better than none? Or do victims usually loose additional money by having to pay the lawyers?

        • Well, as this is Germany and Not the US, i highly doubt that a retail investor will See any compensation. But maybe this time is different ?

        • bonjourhamburger

          @benny: Ich denke, der agiert eher als Insolvenzverwalter ohne Titel. Jemand, der nicht wie ich Googlen muss um die Red Flags zu sehen. Die Firma wird schleunigsts umbenannt, die wenigen Assets von Wert separiert und evtl. verhökert. Bleibt die Frage ob Marsalek, Braun und Co.s Privatvermögen pfändbar ist. Vermute: Die haben sich Middelhoff-mäßig kleingerechnet, geschieden + Stiftung für Ehefrau oder ähnliches.

        • Braun gehören immer noch 7% des Unternehmens. Das wäre ein weiterer Punkt, den ich nicht verstehe. Immerhin hat er jetzt schon rund 700 mio. in einer Woche eingebüßt. Nebenbei wurde fast die Hälfte der Aktien in 3 Tagen gehandelt. Wer kauft die denn?

          Ob die Assets so “wenig” sind, würde ich auch mal bezweifeln. Immerhin haben sich Groß-Kunden wie Aldi für Wirecard entschieden.

          M.E. ist die Frage was bei den CashFlows faul ist und nicht ob die 2 Milliarden weg sind. Da der neue CEO bei der Adhoc gleichmal: “Der Vorstand geht außerdem davon aus, dass die bisherigen Beschreibungen des sog. Drittpartnergeschäfts (Third Party Aquiring) durch die Gesellschaft unzutreffend sind. Die Gesellschaft untersucht weiter, ob, in welcher Art und Weise und in welchem Umfang dieses Geschäft tatsächlich zugunsten der Gesellschaft geführt wurde.” raushaut, sind wohl nicht nur die 2 Milliarden weg.

          Mich würde auch nicht wundern, wenn der Laden plötzlich jemanden anderem gehört.

        • Braun gehören die Aktien ökonomisch schon lange nicht mehr. E

        • bonjourhamburger

          Das mit den 7% ist natürlich ein Punkt. Auch hat WDI ein Geschäft an sich.

          Was mich aufschrecken lässt:

          – Braun muss aktuell seine Aktien verkaufen (weiß nicht ob alle), um einen Privatkredit bei der DB welcher mit seinen Aktien beliehen ist, zu bedienen. Das stinkt sehr nach dem alten Stiftungs-Ehefrauen-Trick, mit dem man sein Vermögen unpfändbar macht.
          – Der andere Punkt ist, dass die vermissten Milliarden nah an die kumulierten Gewinne der letzten X Jahre kommen. Und X könnte hier entgegen der in der Presse gehandelten 2 gegen eine 9 oder 10 getauscht werden.

          Vielleicht bin ich durch meinen Verlust zu geblendet, aber ich vertraue in der Situation eher denen, die seit Jahren richtiger lagen als ich. Wie z.B. Matthew Earl (dem Short-Seller, dem u.a. desnachts ein paar “große Osteuropäer” an der Haustür fragten warum er so ein großes Interesse an Wirecard hätte):

          “This is a business which looks to have blown up around 2011 and failed to recover.” Laut ihm könnte so gut wie alles seit 2011 fake sein. Immerhin: Die Kreditgeber haben ein Interesse Insolvenz zu vermeiden.

        • Es “müssen” derzeit viele verkaufen, da keiner mehr Wirecard-Aktien halten möchte. Aber es gibt eben auch Käufen und das im Umfang von fast 50% der Aktien. Auch heute schon wieder fast 4 (!) % der Aktien gehandelt.

          Interessant ist, dass der neue CEO scheinbar nichts besseres zu tun hat als sein Linkedin-Profil zu aktualisieren und Kommentare abzugeben:

          https://www.linkedin.com/in/james-freis-6999ba79/?originalSubdomain=de

          Mein Gefühl sagt mir, dass da noch eine Überraschung kommen wird 😀

        • bonjourhamburger

          @benny ok, verstehe was du meinst 😉

          Ich sehe aber nur einen einzigen LinkedIn-Kommentar von Freis bzgl. wie einfach es ist, in MUC Bier zu kriegen wenn man es braucht. Hast du da noch mehr?

          Die “Überaschung” dürfte mmn sein:
          – dass E&Y Deutschland noch weitere Testate als nur das für 2018 zurückziehen wird
          – wer in den nächsten Tagen verhaftet wird, untertaucht oder vor den Zug springt

          Keine Überaschung dürfte sein:
          – Kreditlinie wird verlängert (außer die Banken springen doch noch ab)

          Darüberhinaus bezweifle ich, dass Freis binnen 5 Tagen eine positiven Preisverlauf bewirken kann. Bis Do. 10 Uhr Morgens hat die gesamte Konzernspitze bei dem Spiel mitgemacht. Dass Marsalek/Braun weg sind, ändert an der Kultur wenig. Freis fängt also ganz von vorn an und es ist nicht klar, ob wirklich alle der verbliebenen Führungsmannschaft ihn bei seiner Arbeit unterstützen wollen.

        • bonjourhamburger

          Und wo man gerade davon schreibt: Markus Braun festgenommen

        • Es macht ein merkwürdiges Bild, wenn man als CEO in so einer Situation, sich um sein Linkedin-Profil kümmern muss und noch Beiträge kommentieren und teilen muss.

          Interessant ist, dass die Verhaftung, die immerhin neben den 2 Milliarden auch gefälschte Umsätze beinhaltet, dem Kurs bei hohen Umsätzen kaum was ausmacht.

        • bonjourhamburger

          aber es gibt nur 1 Kommentar, sonst nix. Oder?

        • Er hat im Vergleich zum Beginn des Absturzes das Profil überarbeitet. Da war er noch zukünftiger Wirecard-Vorstand.

          Es geht nicht um die Kommentare, sondern darum, dass er scheinbar noch Zeit für sowas hat. Sieht merkwürdig aus. V.a. da es sich derzeit um einen 24h-Job handeln sollte, da die Krise ja in Asien ist und somit auch nachts bei Wirecard ordentlich was los sein sollte.

          Ich bin mal wirklich gespannt, wo die ganzen gehandelten Aktien gelandet sind. Irgendjemand muss ja auch immer kaufen.

  • Great read. Have you considered sharing your story with Dan McCrum? Or are you just glad to ‘leave it behind’. I think your story deserves more attention. Somebody will write a book about this probably and you deserve a mention 🙂

  • Congrats to keeping up the good work despite the pressure. Great article, indeed the best I have seen so far on Wirecard.
    It is worrying that this happens for a DAX listed company. Theranos was a privately held company and surely more difficult to see the issues from the outside (even though the VCs should have seen them also).
    I am definitely looking forward to the movie already and „Groteske Bumsbude“ is a great title for it! 🙂

  • Thanks for sharing your experience. That’s really an amazing story and your a part of it! It will be interesting to see what will change in future times for the whole financial industry in Germany as it will not only affect banks but also Ffntechs, AssetManagers or how Regulators work. In my former (working) life I analysed DWS and Tim Albrecht(met him serveral times) quite often and for me Albrecht was convincing FundManager started in SMC space. I was scared when I learnt that the DWS Germany Equity Fund range was still packed with WireCard after FT’s Dan McCrum well researched articels were published. In most parts of the industry you have to dance untill the music ends one ore the other way.

  • Hi memyselfandi007, congrats to all the work – I have one question: you mention that the profitability here could not be explained by its business model. Would that imply that a company with the same business model, which is e.g. the Dutch company “Adyen” from what I understand, is potentially fraud as well? Many thanks!

  • Exzellent, der beste Beitrag zu Wirecard im gesamten Internet!

  • So in the end Wirecard was just another payment processor for high risk businesses, mostly Porn and Gambling sites in foreign countries. They brought the credibility as a big german DAX firm and Visa & Mastercard must have trusted them blindly. Also they present themselves on their website as a payment processor for legit companies (they may had a couple) but their core business was settling payments for these higher risk businesses. The high risk comes with the fact that they are dealing with illegal/barely legal entities in foreign countries in shady business fields which must have lead to so much shady accounting and cases of stolen/fraudulent payments which all mounted up in the end. Probably why Braun is now trying to spin it like they are being defrauded themselves. It’s astonishing they could keep this up for over 15 years to be honest.

    It will make a killer movie though once this is full investigated and all the sites and companies are revealed which they processed payments for (and the companies that don’t exist and defrauded Wirecard). Imagine what kind of weird stuff they’ll discover and how big the discrepancy was between this and their supposedly clean side of business.

    Fascinating to watch from the outside and kudos to you for being one of the first to uncover this in the German forum. Hope your “Bumsbude” makes it into the movie somehow. 😉

  • Great article and great job! Thanks for sharing your story.
    It illustrates how hard short selling is:
    -the stock can go up a lot before you are proven right, and the position grows in your portfolio…
    -fraudulent companies are fighting dirty
    Hence timing is paramount… but very hard to do!

  • I had read your initial post on wallstreet online and also followed your updates on here on wirecard. One thing I find really interesting is the reaction of the online community to your initial posts and the subsequent attacks on anyone being critical of their „favourite“ company. I still do not fully understand the psychology behind it, but it amazes me that it always follows the same pattern and in the end a significant amount of people see themselves as the „innocent betrayed by the company“.

    I also had read the book „Fooling Some of the People All of the Time: A Long Short“ from David Einhorn based on your suggested reading and it’s exactly the same story.

  • Great story, hope you will play a part in the movie !

  • Excellent post! Very instructive experience. Thanks for sharing.

  • Meinolf Heptner

  • Sadly, it also destroys the possibility of a German champion with a more future oriented business model…

  • What is your view of the future of regulatory policing in the age of anonymous internet forums? Some say that a reddit forum called wallstreetbets is getting away with murder.

    • I think the focus in Germany should be currently on actually policing regulated financial entities. Once they can do that, they can start policing anything else.

  • friendlyfollower

    A dear friend and I have a date for watching the Wirecard movie when/if it comes out so I 100% concur with you punchline as well as the rest of the article. However, as much as I am tempted to say “I told you so” to everyone who I told so, I am saddened to see what this will do to the reputation of the German stock market and the (uneducated) public opinion of stocks.

    I will enjoy this story unraveling nonetheless!

    • The upside is that maybe this whole affair creates the right consequences also with regard to German capital market law etc.

      Germany’s stock market regulation is pretty substandard in my opinion anyway. No one gets ever convicted for insider trading etc. etc.

  • Bernie ähh Markus Braun with a Video Statement from last night: The poor guys have been defrauded themselves !!!

    Amazing plan B after E&Y folded.

  • A Twitter thread on Wirecard winners& losers:

  • Sander Dassen

    Thanks for this, nice read

  • Really appreciate this post, thanks for sharing.

    • Thanks a lot for this article.

      Given your experiences with the company I can fully understand that you were hesitant to publish it earlier.

      I fully agree with your conclusion that often times the people with the deepest knowledge (ie hedge funds) do have the lowest credibility in the public unfortunately… and therefore those fraudulent companies can sometimes thrive for a long time 😳

  • Yes, very good work by you even 12 years ago.

    Wirecard has been a favourite of the German media for many years. Regarding Wallstreet Online, I can also confirm that their censorship at least until 2013 (when I deleted my membership) was strange and intransparent.

  • Just wow.

    And congratulations for resisting the urge to short with such a good case! I was short, with less conviction, for a few weeks circa 2015, and thankfully also quit and put it on the “too hard” pile.

    A little anecdote is that there were struggling even with the legit biz: as a small client of their virtual visa card, they lost my KYC data and blocked my account (fortunately with very little on it) until I do KYC again from scratch. I refused and it took months to reach someone who could find my data and fix the problem.

    I suspect the details of the implosion will be spectacular.

  • Amazing Story. Congrats to you and keep up the great Work.

  • behindtheshares

    Literally epic articel!!

  • I knew I was reading a very good article as soon as I read the expression ‘bumbsbude’. I dearly hope this German word will be adopted by English language 😀
    But seriously, a very nice article. I agree 100 % to (a) the public does not get the function of short sellers and (b) shorting is risky, since ‘the market can stay irrational longer than…’

  • ‘The Smartest Guys in the Room’ is the book to read about Enron. Like Wirecard (and Tesla,…) it was pumped up by the media and Wall Street. It’s interesting how ordinary employees were willing to participate in the fraud (notably the fake Internet trading room Enron set up to impress visiting Wall Street analysts). Enron executives made the covers of all the financial magazines. The company was billed (by Fortune magazine) as the “most innovative company in the U.S.” Even when warnings came out (in ‘Barron’s ‘ magazine) they were ignored. A quick look at the financials didn’t reveal the problems but had enough red flags so that no one should have bought the stock (with a 10 % ROE) at something like 4 times book value.
    Almost all reporters (even many at the WSJ) and most financial analysts are unable to read and understand company reports, or to analyze them.
    An excellent job on your part.

  • Thanks for sharing this. Very interesting indeed. Great conclusions as well.

    Have been skeptically following wirecard for roughly the same time.

    “the reporting remained opaque and they never really explained how they make their money.”
    This is it. Warren Buffett’s wisdom comes to mind: Only buy things you understand.

    Shocking that they got W:O to ban you. But, as you probably read, they’ve also hired indian hackers to go after people that write negatively about them – so consider yourself lucky.

  • Thanks for sharing your amazing personal story!

    Looks like DWS partly managed to dodge the bullet selling at least 60% before the collapse. Still bad though!
    https://www.wiwo.de/unternehmen/banken/wirecard-dws-prueft-rechtliche-schritte/25930146.html

    • I guess the internal pressure got too big after the KPMG report. Still a big scandal in my opinion for DWS.

      • Shortseller hat 2% augestockt. DWS hat 40% von 2,5% verkauft. DAX-Anteil hat sich deutlich verringert ==> BlackRock muss bei den ETFs anpassen. Könnte auch zu einer netten Überreaktion führen. V.a. wenn die FCFs werthaltig sind. 97% des Umsatzes wurden ja testiert.

        • Es gibt kein cash und kein fcfs. Und blackrock muss aktuell gar nichts anpassen. Und der Wert des Testats ist analog der aktie gleich Null. Bis dahin kann gezockt werden.

        • Ich bin gespannt 😉 Die Frau in dem CEO-Video sah jedenfalls nicht gerade entspannt aus. Jetzt jedenfalls bei 19 Euro. 2400 mio für 600-700 mio FCF (falls es einen gibt). Am besten gefällt mir immer noch der Unterschied NetCash und langfristiger NetCash.

  • Congrats mmi and thanks for sharing. Unbelievable.

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