While some have characterised this as a warning about the hazards of investing in fast-growing technology companies,that would be a mistake. It’s about a fraud that was perpetrated under the noses of financial,government,audit and regulatory institutions. They all failed.
The company,which has now filed for insolvency,owes creditors $5.7 billion and its chief executive has been arrested on suspicion of accounting fraud and market manipulation.
At its heart this scandal is about a missing $3.1 billion that the company claimed was parked in the Philippines - the veracity of which no one,including the auditors,seemed inclined to substantiate.
It should stand as a herogram for the media - in this case London’sFinancial Times - which doggedly followed the travails of Wirecard over four years raising unpopular allegations for which it received the ire of the establishment. In the process it endured legal threats and allegations of creating fake news.
It is also a victory for a small army of short sellers that for years had raised red flags about Wirecard. This much-maligned segment of the financial ecosystem is systematically called out by targeted corporations for falsely manufacturing bad news for their own financial gain.
History,however,has shown highly detailed critical reports from short sellers have regularly exposed problems within companies that have been well hidden within corporate documents.