Wirecard suffers another huge fall as attention focuses on missing cash

Wirecard story returns with a vengeance

The Wirecard story has returned to our screens with a vengeance, as the German payments firm warned that almost €2 billion of cash on its balance sheet likely does not exist.

The news coupled with the withdrawal of its most recent financial statement and the admission that accounts for other years may be inaccurate prompted another huge drop in the share price. While the bank says that it is now in ‘constructive discussions’ with lenders over an extension to €2 billion in loans, there is a sense in the market that the firm is fighting for its existence and may be forced into administration.

Wirecard shares trading on fundamental news

The weekly chart of Wirecard tells the story of a firm that could do no wrong, until it faced the first of the allegations about financial irregularities. A steady rising trend from 2010 had made the firm one of the stars of the DAX, as the shares climbed from around €7 a share to a peak of €204.

A steady descending channel from the second half (H2) of 2018 was broken to the downside in impressive fashion, when the stock price slumped from €105 on 18 June to a low of nearly €13 in early trading on 22 June.

At this point the shares are trading on fundamental news, ie whether the company survives. After such a huge downward move some might expect a bounce, but selling volume has been immense and others might follow suit. The volatility in this stock is huge as well and thus traders must be careful in their stop placement and positioning sizing.

Of course, while the shares might appear to be an ‘obvious’ sell, there is always the potential for a quick and dramatic rebound, even if it does not last, so both buyers and sellers using spread bets or CFDs must manage their risk extremely carefully.