We went halfway round the world to uncover the truth

I NEVER met Markus Braun, the reclusive ex-chief executive of Wirecard, the wunderkind of German fintech, who was last week arrested and released on bail.

I guess I missed my chance. Six years ago, when I had my first serious doubts about their accounting and opened a dialogue with them, the company proposed I travel to their Munich offices for a visit. The plan would have been to convert a sceptical analyst to the payment revolution religion.

I politely declined, fearing it would compromise my objectivity. Besides, nothing Braun would tell us could be relied on – at least from what we had so far seen in the financial filings of their Asian subsidiaries.

‘Red Flag Alert’, our first note on Wirecard, came out in July 2014. It highlighted concerns about the company’s true profitability and recommended clients who were in the stock to get out. Those who were not in should short the stock.

We couldn’t have known back then exactly how it would unfold, and as the criminal investigations now gather momentum, the truth is stranger than fiction.

The stock went up more than 500 per cent before it collapsed, making it an impossible rollercoaster to cling to.

Clients who took our advice in 2014 to go short got badly burnt initially. For a long time, it seemed we were on the wrong end of that trade.

As we got deeper into the accounts and found more that didn’t stack up, we kept putting out notes, only available to our paying clients. These set out in extreme detail the widening gap between the company’s often ludicrous claims about global domination and the reality of an overhyped stock. We couldn’t find many of the claimed customers, the technology seemed poor, the cash flows were negative and the debt kept piling up.

When an anonymous report authored by ‘Zatarra’ and then journalists came out with similarly negative evidence, we knew we were not alone.

Wirecard were adamant, claiming these were all lies, and their loyal analysts called it fake news, put about by nefarious hedge funds to destroy a good solid German company with winning tech. Blue-chip investors took Braun at his word. As Wirecard’s market cap skyrocketed towards $25billion, we began to wonder: have we got this one wrong? But if we’d got it that wrong, why did the accounts keep getting worse? Why did their acquisitions keep raising alarm bells and why had they used an opaque trust in Mauritius to wire a supposed $300million into India, for a business that was impossible to track down on the ground?

I sent an investigator to Chennai in India to check out a subsidiary with the mandate to ‘show me why I’m wrong’. He was followed back to his hotel by some men in a tuk-tuk. The poor guy was so shaken up he checked out. Meanwhile, the shops that Wirecard claimed to operate were non-existent.

This one came right in the end. By the time Wirecard filed for bankruptcy on June 25, we had been halfway round the world, produced 43 notes, and held 230 meetings with clients. As I said in my signoff note on Wirecard last week – if it sounds too good to be true, it is too good to be true.