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?
July 23, 2019
We’ve shown that of the €400M of MCA lending, the €133M that Wirecard claims is in Brazil and Turkey is not correct – their own accounts show this. The obvious next question is whether the remaining €267M is where they say it is. As with the €133M, Wirecard’s disclosure has been extremely varied, vague, and inconsistent about where this cash is. And outside of Brazil and Turkey, management references to MCA lending have consistently said it is “small”, which makes no sense if Brazil and Turkey are only 1/3 of the €400M.
Two of the members of the management board (CEO and Chief Product Officer) have made directly contradicting and confusing statements about MCA lending in Europe:
May 2019: Wirecard’s CEO stated there is, outside of Brazil and Turkey: “a small part in Europe and a small part in Asia”
If 1/3 is in Brazil and Turkey, the remaining 2/3 (€267M) must be elsewhere - and is certainly not a “small part”.
June 2019: Wirecard’s CPO stated they are planning to launch MCA in Europe: “by the end of the year”.
When asked about MCA: “Where is our focus area? On the one hand it is in Asia, then another one Brazil, and another one, ready by the end of the year, the European region.” As the head of product (and President of Brazil), we would expect her to have the most up to date information on where and when products have been, and will be, launched. Including MCA.
Given the inconsistencies, we cannot distil the truth from the varying statements from Wirecard management. But, very simply:
Wirecard claims €400M of MCA has been lent. The 1/3 (€133M) they claim is in Brazil and Turkey is, on the basis of their own filings, completely untrue. The “small part” in Europe is part of the additional missing €267M, but this is impossible as the CPO claims the product hasn’t been launched yet.
From at first missing €133M – it seems we are missing €400M.
Where is the cash? Why are the CEO and the CPO making directly contradictory statements? Does Softbank know where it is investing its money?
|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|