Why Did Shares Of Scandal-Scarred German Firm Wirecard Surge 150% On Monday?

Wirecard AG, the scandal-ridden German payment processor company engulfed in an accounting fraud imbroglio, saw its shares nonetheless surge by 154.5% on Frankfurt Stock Exchange on Monday.

Shares of Wirecard, which filed for insolvency on Thursday, plunged 95% last week.

“Wirecard shares have soared [Monday] on chatter that Worldline, the French payments group, might seek to buy parts of the struggling company,” said David Madden, market analyst at CMC Markets in London.

On Friday, the German daily newspaper Frankfurter Allgemeine Zeitung reported that Worldline was just one of several entities interested in acquiring parts of Wirecard.

Worldline itself is planning to acquire another French tech firm called Ingenico.

“While Wordline is yet to respond to the [Frankfurter Allgemeine Zeitung] article, it is consistent with our view that the merged Worldline/Ingenico… would be potential beneficiaries and/or suitors for customers seeking to leave the [Wirecard] platform,” analysts at Jefferies wrote on Monday.

But Jeffries also warned they were “cautious” about any such acquisition, citing that Worldline/Ingenico are also “well positioned to capture customers organically that would churn away from an insolvent [Wirecard] platform.”

But some observers attributed Monday’s price spike to merely a dead cat bounce.

Meanwhile, Wirecard faces a mountain of other troubles – its former CEO Markus Braun was arrested last week on suspicions of fraud. He posted a hefty bail of €5 million ($5.62 million) and is currently out of custody, Authorities in Munich are investigating Braun and other former company executives for their possible role in financial misconduct that led to some $2 billion in cash “missing” from Wirecard’s accounts.

Some German lawmakers also want a parliamentary inquiry to investigate Wirecard’s collapse, with a particular focus on auditors and regulators who were caught asleep at the wheel.

"The role of the finance ministry must be examined, as reports of irregularities [at Wirecard] have been coming in for quite some time", said conservative lawmaker Alexander Radwan. "Fintechs offering financial services need appropriate oversight.”

On Saturday, the company said its business activities were continuing, but warned it may have to file insolvency applications for some of its subsidiaries.

“With the exception of a small development branch office, no insolvency applications have been filed by [Wirecard] group companies at present,” the company said in a statement.

The company also noted that its subsidiary Wirecard Bank is not part of the insolvency proceedings.

However, on Friday, Britain's financial watchdog, the Financial Conduct Authority, ordered Wirecard's U.K. subsidiary, Wirecard Solutions Ltd., to cease all regulated activities.

"Following last week's news of [$2 billion] missing from the accounts of the German company, Wirecard, we placed requirements on the firm's U.K. business so that it should stop carrying out regulated activities and not pay out or reduce any money it holds," the regulator said.

As a result, thousands of Britons have had their cash cards frozen because they use a payment processing service owned by Wirecard.

"It's really bad. I'm left with nothing," said Dawn Guilfoyle "Once the gas goes off, I'll have none for cooking or hot water. I am going to have to see if I can go to a food bank. I have bills to pay and I am already in debt management."

Online card company Pockit, which uses Wirecard services, has apologized to customers telling customers: "We are working with the Financial Conduct Authority to reactivate all accounts as quickly as we can and reunite you with your money. Unfortunately, we cannot give a timeframe for the resolution of this issue, but we are working round the clock."