One day after shares of German online payments company Wirecard shed more than one-quarter of their value following an explosive report in the Financial Times that raised questions about the company’s accounting practices, analysts are warning that Wirecard may have become the latest victim of “fake news” propagated by short sellers in violation of securities laws.
Commerzbank analyst Heike Pauls (who has a buy rating on the stock with a price target of 230 euros) blasted the FT article as “fake news” and pointed to “the usual coincidence with rising short interest” which he said was indicative of market manipulation. Because the allegations have “no substance”, Pauls said the selloff was a “buying opportunity.”
Helping spur the rally, Munich prosecutors told BBG that they saw no indication of any crime by Wirecard under German law, according to a spokesperson for the Munich prosecutors’ office.
The allegations rocked a company that has seen its value quintuple in recent years. Wirecard recently surpassed Deutsche Bank in market capitalization, and replaced Commerzbank in Germany’s DAX 30 index. Wirecard has vehemently denied the report.
The FT report purported to cite an internal presentation delivered by an executive charged with running the company’s Asian operations that described potentially fraudulent money flows at the lender.
But other analysts offered a more nuanced take. Some argued that, regardless of whether the allegations are true, the selloff is a sign that Wirecard’s shares were clearly overvalued.
“In a large organization, there is always the possibility that some individual does something wrong,” said Robin Brass, a Frankfurt-based analyst at Hauck & Aufhaeuser.
“It is the same as we have seen before,” said Markus Friebel, an analyst at Independent Research. “Allegations come out, and we don’t know if they are true or not. The share price reaction confirms our view that the company is overvalued.”
And doubts were magnified by the company’s “hard to understand” business model.
“Wirecard’s business model can be hard to understand at times, and it’s easier to criticize a company whose sales are difficult to pin down,” said Mirko Maier, an analyst at LBBW. “Wirecard is not an automaker where you see cars leaving the factory each day.”
As Bloomberg pointed out, this isn’t the first time the company has had to defend its reputation: reports about accounting issues sent shares reeling in 2008 and again in 2016. In 2016, a fake research report was circulated by a shady UK-based research shop has led prosecutors to bring tens of thousands of euros in fines against one of the suspects.