Wirecard Showdown Stuns Analysts, Raises Liquidity Questions

(Bloomberg) -- Wirecard shares plunged 62% on Thursday, after the company delayed publication of its annual financial results for the fourth time and revealed that auditors were unable to find about 1.9 billion euros ($2.1 billion) in cash.

Analysts and investors said the company is losing what little was left of investors’ trust. Focus will now turn to liquidity, they noted, as the payment firm faces a potential termination of loan agreements that threatens its survival.

The stock had ten buy-equivalent recommendations before Thursday’s announcement, with analysts forecasting an average 12-month price target that implied 49% in upside potential. At least five analysts have since suspended coverage and at least two lowered their ratings, according to Bloomberg data.

Here’s what analysts and investors had to say:

Independent Research, Markus Jost

(Rating cut to sell from buy)

• Uncertainty about Wirecard’s future rose significantly today, and there is now a very high risk of its customers turning elsewhere
• Slashes PT to EU40 from EU120 citing factors including insolvency risk, severe loss of trust, more pessimistic long-term assumptions and estimates

Goldman Sachs, Mohammed Moawalla

(Suspends rating)

• Suspends their investment rating, price target and earnings estimates as there is not enough of a basis for determining such rating or PT for the company.
• Says their previous investment rating, PT and earnings estimates for the company are no longer in effect and should not be relied upon.
• The bank’s previous rating was neutral with a PT of EU130

NordLB, Wolfgang Donie

(Rating cut to sell from hold)

• “It looks like the last remaining speck of investors’ trust has been squandered.”
• Wirecard’s situation can only be described as untenable, as the scandal has ballooned into a crisis threatening the company’s existence and degenerating the stock into a gambling bet.
• Advises investors to stay away from the stock and slashes its price target to 20 euros from 80 euros.

Mirabaud, Neil Campling

(Sell)

• “Wirecard’s retreat could be terminal.”
• Questions must be asked about the company’s ability to maintain its Visa and MasterCard licenses.
• Today’s developments could have far-reaching consequences for its ability to operate worldwide.

Morgan Stanley, Adam Wood

(Equal-weight)

• Wirecard’s acknowledgment that failure to complete an audit by June 19 may lead to the termination of 2 billion euros in loans moves the focus to its balance sheet and liquidity.
• Calculates that if 1.9 billion euros of cash balances cannot be verified, Wirecard might only have 220 million euros of available cash.
• Would expect Wirecard to seek covenant waivers if banks call the debt.

Deka, Ingo Speich

• “We are stunned.”
• Says a fresh start in management personnel is more urgent than ever.

Keefe, Bruyette & Woods, Sanjay Sakhrani

(Market perform)

• Says latest developments provide credence to the allegations raised by the Financial Times and some investors around the spurious nature of Wirecard’s Third Party Acquiring business.

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