Focus on accounting: BaFin does not want to ban betting on falling Wirecard rates | message

—“We are currently not planning a short sale ban at Wirecard,” a BaFin spokeswoman told Reuters on Friday. “High net short positions alone are no reason for that.” At the beginning of 2019, BaFin had banned betting on the price losses of Wirecard shares for two months – and received a lot of criticism.

Wirecard has repeatedly been accused of incorrect accounting, especially among foreign subsidiaries, for years. In order to get this out of the world, the supervisory board of the payment service provider commissioned a special audit by KPMG in autumn. However, the auditors were unable to alleviate many of the accusations, and they also accused Wirecard management of having failed internal controls.

Since the submission of the KPMG report at the end of April, hedge funds have increased their bets on a price slump in Wirecard shares, the net short positions published in the Federal Gazette have increased to over ten percent. That is just the tip of the iceberg: in the Federal Gazette, business is only published when the threshold of 0.5 percent is exceeded. So far, the short seller’s bet seems to be working. Before the KPMG report was published, the Wirecard share was quoted at more than 130 euros, after which it plummeted. So far, the speculators’ bets seem to be working.

With short sales, investors bet on falling prices. In doing so, they sell securities that they previously borrowed for a fee. If the price drops by the return date, they can buy the titles cheaper on the market and make the difference. On the other hand, if the price rises, short sellers are at risk of losing.

Wirecard does not come out of the line of fire

BaFin has been investigating Wirecard since the beginning of 2019 and has now set its sights on the company on numerous fronts. So far, the Bafin has only taken action against investors and journalists, which it reported in April 2019 to attacks on short sales by the Munich public prosecutor’s office. There have been several waves of short sales surrounding critical reports by the Financial Times. The newspaper has always rejected any interaction with the speculators.

In February 2019, BaFin imposed a two-month short sale ban – a one-off process. Never before had she prohibited bets on the price of a single share falling. This approach had received a lot of criticism from the authorities. Among other things, she was accused of unilaterally sided with the company. BaFin continues to defend its approach today. You have seen indications of market manipulation and should have acted against it so that the trust in the Financial markets is not shaken.

Frankfurt (Reuters)

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