Germany bans Wirecard ‘shorting’ amid probe of journalist

Germany’s financial watchdog has banned “short” selling of Wirecard shares due to volatility in the payments firm’s stock following reports in the Financial Times which are now the subject of an investigation by German authorities.

Munich prosecutors said on Monday that they were investigating a Financial Times journalist, confirming that they had widened an investigation into a possible violation of securities trading rules.

The Financial Times rejected as “baseless and false” any allegations against the newspaper or its journalists of market manipulation or unethical reporting relating to Wirecard.

A spokeswoman for the Munich prosecutors said their inquiry, which was in response to a criminal complaint, was at an early stage and declined to give any further details.

Bafin, Germany’s financial markets regulator, said the ban on “shorting” Wirecard was a first for an individual stock, although it outlawed shorting of bank shares in 2008. Short selling is when an investor borrows shares to sell in the hope of being able to buy them back later at a lower price.

The London-based Financial Times has published a series of reports alleging fraud and creative accounting at Wirecard, which the Munich-based firm has rejected as defamatory.

“The last few days have seen massive uncertainty in financial markets. This was triggered in particular by the price development of the Wirecard share in recent weeks,” Bafin said in a statement.

Shares in Wirecard, which provides payment processing services, gained 12% in Frankfurt, partly reversing a recent drop of 40%. Bafin said it had banned the taking or increasing of short positions until April 18.

Bafin said Wirecard had been the subject of negative reports between 2008 and 2016 and again since late January.

“The press reports have coincided with increased net short positions,” Bafin said, adding that the short positions were held by various investors, especially from abroad, often below the publication threshold.

“We welcome all measures of the supervisory authorities that contribute to a quick clarification,” Wirecard said.

Wirecard, founded in 1999, has been a perennial target for speculative short sellers, who have questioned its accounting methods and rapid international expansion.

This has caused huge volatility in Wirecard’s stock, though its share price has rebounded repeatedly, with the company last year entering the blue-chip DAX index.

“In recent days, there has been a further substantial increase in the net short positions,” Bafin said, adding that the events had created market uncertainty, particularly over the appropriate price determination for Wirecard shares.

Regulatory filings show that one of the firms shorting Wirecard is Odey Asset Management, which had a short position against 0.77% of Wirecard stock as of February 8.

“I find it very surprising that Bafin are willing to step in at this point in time,” fund manager Crispin Odey said.