BERLIN: German and European financial market watchdogs ordered on Monday a ban on short-selling shares in payment processing firm Wirecard, sending the stock price soaring after a weeks-long rollercoaster ride over fraud allegations.
In Bonn, market supervisor Bafin said that it issued a decree “forbidding the establishment of new net short-selling positions in Wirecard AG shares or to increase existing net short-selling positions” for two months.
Short-sellers borrow shares, sell them on the market and later buy them back. If the price of the shares has fallen, the difference in price is profit for the short-seller, making the practice in essence a bet on falling stock prices.
In a separate statement, the European Securities and Markets Authority (ESMA) said it “issued an official opinion agreeing to an emergency short-selling prohibition” on Wirecard shares.
The Munich-based firm’s stock market woes “are adverse events or developments which constitute a serious threat to market confidence in Germany,” the authority said, making the ban an “appropriate and proportionate” response.
Financial wunderkind Wirecard’s troubles over the past three weeks are all traceable back to allegations of fraud in its Singapore office.
A series of investigative articles in the Financial Times (FT) alleged accounting trickery to pad the books in the firm’s Asian operations. Wirecard has called the allegations “defamatory” and said it plans legal action against the British newspaper. — AFP
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