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Grab puts partnership with scandal-hit Wirecard on hold

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
Markus Braun, former CEO of Wirecard has been arrested. Photo: Michael Dalder/Reuters

Asian ride-share company Grab said it is distancing itself from German payments company Wirecard (WDI.DE), which is embroiled in a scandal over €1.9bn (£1.7bn, $2.1bn) missing from its balance sheets.

Uber competitor Grab said on Wednesday that it was putting its partnership with Wirecard on hold until further notice, while a number of other big clients are reportedly keeping a close eye on the situation at the electronic payments provider.

“We have not yet started the integration work for the Wirecard partnership and are pausing the partnership until further notice,” said a Grab spokesman in Singapore.

Bank of America lowered its Wirecard price target to €1 on Tuesday, from a recent €14, and put an Underperform rating on it, based on the risk of Wirecard losing customers and licenses.

Reports that Revolut has decided to migrate its customers away from Wirecard, Grab’s review of its Wirecard partnership, and news that Bank of China is considering terminating its credit line with the German company “suggest that the level of support from lenders and customers may be low or non-existent going forward,” the Bank said in a note.

“The big question is whether they retain the Visa and Mastercard licenses,” Mirabaud analyst Neil Campling told Bloomberg. “Without those they have no business.”

Wirecard, which has already been the target of investigations over its accounting practices by the Financial Times last year, last week claimed that €1.9bn had gone missing, after auditor EY said it was unable to sign off on the 2019 accounts.

READ MORE: Former Wirecard CEO Markus Braun arrested

Wirecard then followed up by saying the assets may not have existed, suggesting it may have been the victim of “considerable” fraud.

Wirecard had claimed the €1.9bn was held in a trust account in the Philippines. However, over the weekend, banks in the Philippines said documents produced by Wirecard appeared to be false, and the Philippines central bank also said the money had never entered its financial system

Markus Braun, the company’s chief executive, resigned at the end of last week, shortly after COO Jan Marsalek was dismissed. James Freis will now head the company on an interim basis.

Braun was arrested by the state authorities in Munich yesterday (23 June), accused of market manipulation. Braun has since been freed on €5m bail, on the condition that he report in to the police on a weekly basis.

Braun, who was the biggest shareholder at Wirecard with a 7% stake, which he had financed by borrowing against the value of Wirecard stock, was forced to sell a large part of his shares on Thursday and Friday last week.

Munich-based Wirecard joined Germany’s 30-company DAX in 2018, bumping Commerzbank out of the blue-chip index.

It was hailed as a shining example of how Germany could produce a successful fintech leader, but has now become a national embarrassment, with fingers pointing at financial regulator BaFin for failing to properly oversee the company.

READ MORE: Wirecard says missing €1.9bn doesn't exist

BaFin raided the Wirecard headquarters near Munich on 5 June as part of a probe into members of the management board for suspected market manipulation, based on “misleading signals” from Wirecard in the months of March and April.

“We’re looking at a complete disaster, ” Felix Hufeld, head of German financial regulator BaFin, said on Monday. “It’s a shame that something like that happened.”