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Wirecard experienced a sharp decline in stock prices in the previous two weeks as a result of press reports of alleged fraud by several of its employees in Singapore.
The European Securities and Markets Authority (ESMA) today announced its official agreement with the German regulator BaFin that an emergency prohibition of short selling must be imposed on net short positions in equities. Wirecard AG (Wirecard) under the Short Sale Regulation.
The measure came into force today at 06:00 CET and is applicable until the close of the day (midnight CET) on 18 April 2019.
ESMA considers that the current circumstances of Wirecard constitute undesirable events or events posing a serious threat to the confidence of the markets in Germany and that the proposed measure is appropriate and proportionate to address the threat to the markets. German financial markets.
The emergency measure prohibits the opening or increase of net short positions in shares issued by Wirecard AG, directly or through related instruments relevant for the calculation of the short position. net. The measure applies to any natural or legal person domiciled or established in the European Union or in a third country. The proposed measure will not apply to transactions involving index-linked instruments. In addition, BaFin clarified that the market maker activities were exempted from the restrictive measure.
Wirecard experienced a severe drop in stock prices over the previous two weeks. During the period from January 30, 2019 to February 15, 2019, the share price increased from € 167.00 (opening on January 30) to € 99.90 (closed on February 15), reducing the market capitalization of 40 %. .
The price of Wirecard shares declined after the publication of press reports of alleged fraud by several employees of Wirecard subsidiaries in Singapore. Negative news items coincided with the increase in net short positions and the correspondingly high volatility of Wirecard share prices.
Wirecard is a worldwide payment service provider headquartered near Munich. It is admitted to trading on the Frankfurt Stock Exchange and is part of the DAX 30. One of its subsidiaries is Wirecard Bank AG, which holds a German banking license. Wirecard is also the parent company of Wirecard Card Solutions Limited, which has been authorized by the UK Financial Conduct Authority to issue electronic money and provide payment services. In March 2017, Wirecard acquired Citi Prepaid Card Services and created Wirecard North America, becoming active in the US market.
BaFin notes that the price fluctuations mentioned above must be examined in the context of past experiences in the German markets, where several German issuers have been the target of increased short selling activity which, according to BaFin, was jeopardize the integrity of the market and investor confidence. an appropriate and effective price determination.
BaFin says that Wirecard experienced such price changes in 2008 and 2016, which prompted BaFin and the prosecution to investigate the existence of market manipulations. The prosecution recently asked the court for a penalty order for market manipulation in the context of the 2016 event.
According to BaFin, the current situation could lead to a decline in the confidence of investors active in the German market vis-à-vis active investors in the German market, a reliable determination of the price can no longer be taken for granted. Another problem identified by BaFin is the potential risk of contagion, with lack of confidence in proper price determination extending to other issuers, including DAX issuers and financial institutions.
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