Hiding accounting fraud requires explaining why reported profits fail to deliver cash flow. Our previous work used regulatory and audited filings to demonstrate that Wirecard claims about MCA business are untrue. Our continued research suggests that Wirecard may be using other means to disguise a lack of cash flow. Fraud can be hidden by overpaying for acquisitions, executive loans against stock holdings being funnelled back into the business, fake earnings from offshore (un-audited) entities and more.
Investors should be asking – what is Wirecard hiding?
December 12, 2019
The KPMG special audit has now been underway for over 50 days, ample time for preliminary reports to be delivered to the Supervisory Board.
If it is real, MCA would be easy to verify to KPMG by providing a list of individual merchants by geography with daily lending balances.
But if management cannot produce verifiable proof of a full history of MCA lending for KPMG, we believe suspending the Management Board immediately is the best way to preserve asset value for equity investors and the recent bond investors, while minimizing the potential legal liabilities of the Supervisory Board, and its members.
We also think it is unwise to allow the Management Board to transfer substantial investor resources to China, without further independent significant due-diligence on the asset in question. The Baker Tilly “independent advice” is, in our view, worthless, given the un-declared conflict of interest by the partner at Baker Tilly, Frank Stahl.
|Wirecard Brazil (€M)||Our|
|Company Reported MCA||400||400|
|Brazil % Estimate||40%|
|Brazil MCA Estimate||160||160|
|Monthly Credit Volume||37.2||37.2|
|Calculated MCA Balance||18.6||18.6|