Wirecard share price: what will happen next?
Wirecard collapsed earlier this year after it was unable to locate €1.9 billion on its balance sheet, with its stock in demand despite it opening insolvency proceedings. But what does that mean for its stock price?
Wirecard collapsed in June after the company said that it was unable to locate €1.9 billion and admitted that the cash likely did ‘not exist’.
The news brought about the demise of the German payments company which was once revered as a darling of the European fintech industry, only for it to become the first member of the DAX index to fail.
The German payment provider had long been a staple investment for major hedge funds in the region. However, after the news went public and former CEO Markus Braun turned himself in to the police, investors quickly began pulling out. Naturally, the Wirecard share price crashed.
From a high of €104.50 in mid-June, its shares have tumbled to €1.59 per share at the time of publication.
Despite the Munich-based payments provider opening insolvency proceedings, the company wishes to continue trading and has said that ‘continuation’ is in the ‘best interests’ of the company’s creditors. But what does that mean for its share price?
Wirecard agent charged with falsifying accounts
A Singaporean businessman with ties to Wirecard was charged with falsification of accounts, with it representing the first person to be charged as part of the country’s investigation into the collapse of the German payments provider, according to a report by the Financial Times.
R Shanmugaratnam is accused of playing the role of trustee for fake bank accounts, which Wirecard told auditors were filled with cash, the report added.
The news helped send Wirecard 2% lower on Wednesday to 1.59 per share, with the stock down 98% since the accounting scandal surfaced.
Why are Wirecard shares still in demand?
Even though Wirecard has begun insolvency proceedings, it remains a member of the DAX index and listed on the Frankfurt Stock Exchange.
On its way down, the stock saw a lot of trading, with individual investors investing into the troubled stock despite warnings from professionals. The fact that the company has fought to remain operational has likely left some investors overly optimistic about its future, leading them to not carrying out adequate due diligence on Wirecard’s fundamentals before investing.
The random rebounds the stock has enjoyed along its journey down is likely due to day traders benefitting from the ‘greater fool theory’ and cashing out at the peak of each short-lived surge. However, the long-term outlook for Wirecard shares is not good. But the stock will remain tradable for the foreseeable future nonetheless.
For the exchange operator Deutsche Boerse to delist the stock, Wirecard must repeatedly fail to report fiscal earnings reports. As it stands, Wirecard has only failed to report its 2019 results. Therefore, so long as the payments provider presents its 2020 results next year, it will remain a fixture on the Frankfurt Stock Exchange.
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