The payment service provider Wirecard is not running out of negative headlines. That’s for sure. The special audit report submitted by KPMG at the end of April 2020 has greatly increased the pressure on the DAX-listed German FinTech, its CEO Markus Braun, and finally its auditor EY. Since then, the share price has plummeted from more than €138 to €76.36 on May 15, 2020. Fans of this FinTech stock are quick to publish conspiracy theories and blame short-sellers for this disastrous development.
The Short-seller Story
According to Wirecard supporters, evil short-sellers have been attacking the Wirecard stock for months now. Even the critical Financial Times journalists were accused of such motives when they began their critical coverage of German FinTech. This was followed by complaints to the public prosecutor’s office and the German watchdog BaFin started investigations against evil short-sellers from UK and abroad.
In fact, it must be said that Wirecard does not make it difficult for short-sellers. The company produces new negative headlines almost every week. The fall in share prices on Friday was also caused by such bad news. The controversial business partner – Wirecard calls it routing partner – Al Alam Solutions FZ LLC from Dubai announced that, due to the damage to its reputation caused by the negative reporting on Wirecard, it would close down the company and transfer its business to other companies in its organization. Already on May 6, 2020, Wirecard announced the closure of its Dubai subsidiary CardSystems Middle East FC LLC, which had a direct business relationship with Al Alam.
The Al Alam partnership explained
As recently as October 2019, Wirecard had presented Al Alam as a reference partner and explained in detail the third-party business using Al Alam as an example (press release dated October 19, 2020). According to this press release
- Al Alam maintains an international network of partner relationships with payment processors and acquirers, which Al Alam has integrated into its technical platform.
- Wirecard’s platform uses an interface provided by Al Alam in the backend and thus gains technical access to the payment and acquiring companies integrated with Al Alam.
- Wirecard currently uses a technical connection to 9 acceptance partners in different geographical regions via Al Alam. This enables Wirecard to offer its customers local payment acceptance via these partner companies.
- In fiscal years 2016 and 2017, over 1,000 primarily smaller merchants connected to Wirecard via marketplaces and PSPs were processed in the backend via the interfaces provided by Al Alam.
Wirecard allegedly had 9 acceptance partners with more than 1,000 merchants (clients) integrated via the Al Alam platform. Surprisingly, the closing of Al Alam is said to have no impact on the transaction volume and thus on the Wirecard business.
Irish Partner GMM vanished in 2017
As early as 2017, Wirecard lost a key partner in David Cartu and his brothers’ GreyMountain Management Ltd (GMM), which contributed hundreds of millions in transaction volumes. GMM, which is registered in Dublin, was sent into liquidation in the summer of 2017. Currently, US investors are suing GMM and its former directors – including the son of former Wirecard UK & Ireland director Michelle Molloy – for millions of dollars in damages due to investment fraud.
Conspiracy theorists wanted
Conspiracy theorists around the Wirecard stock are busy trying to fit the negative news into the short seller puzzle. They call the closing down of Al Alam a non-event! Strange, isn’t it? Provided that quite a lot of business was routed via this partner until a few months ago.
Slowly but surely, the Third Party Acquirers (TPA) criticized in the KPMG audit report are apparently vanishing into thin air. It will be interesting to hear what the auditor EY has to say about this.