" class="no-js "lang="en-US"> Goldman Sachs, Morgan Stanley held 24% of Wirecard voting rights before the collapse - Fintech Finance
Monday, March 27, 2023
Tradetech Europe

Goldman Sachs, Morgan Stanley held 24% of Wirecard voting rights before the collapse

By Justinas Baltrusaitis

The unexpected Wirecard collapse is still eliciting interest as financial players continue to raise queries on how the once high profile company was managed. The focus is on regulators and key shareholders who had the voice in overseeing the firm’s management prior to the bust.

Data obtained by Buyshares.co.uk from the Wirecard website shows that US-based Goldman Sachs Group and Morgan Stanley accounted for the highest voting rights at 14.1% and 10.29% respectively bringing the total to 24.39%. France based Societe Generale S.A had the third-highest voting rights at 6.37% followed by Black Rock with 5.57%. Citigroup closes the top five categories dominated by US-based firms with 5.02% in voting rights.

Our research focused on stakeholders with voting rights of at least 3% and DWS Investment had the sixth-highest voting rights at 3.34%. Union Investment Privatfonds had the least voting rights at 3.18%.

In the global payment sector, Wirecard was among the major players thanks to its established structures and a growing customer base. Buyshares.co.uk’s research also reviewed other global payment companies by ranking their market capitalisation as of 2019. Visa occupies the top spot with a market cap of $352.57 billion while Mastercard is second with a $256.88 billion in market capitalisation. Paypal has the third-highest market capitalisation at $128.95 billion followed by Worldpay at $37.83 while Shopify wraps the top five groups at $30.64.

Square’s market capitalisation of $26.2 billion places it sixth among global payment solution companies followed by First Data’s $23.99 billion. Adyen is eighth with a market capitalisation of $23.78 billion followed by TSYS at $21.86 billion. Before the collapse, Wirecard had a market capitalisation of $19.3 billion to place it in the tenth spot.

With voting rights, shareholders like Goldman Sachs Group had the opportunity to vote on matters of corporate policy within Wirecard. They played a key role in determining who makes up the board of directors, issuing securities, initiating corporate actions, and making substantial changes in the corporation’s operations.

Tracing Wirecard’s collapse

Wirecard was suspended by The Financial Conduct Authority on Friday after its parent company filed for insolvency in Germany following the discovery of a $2 billion hole in its accounts.

The collapse of Wirecard has obviously sent shockwaves in the financial circles raising questions on accounting practices and regulations.

Following the news, card payment services linked to WireCard like Pockit, Curve, Payoneer, and FairFX were locked out with users remaining stranded. Following the insolvency application, Wirecard’s clearing service was also not able to process payments, leaving thousands of customers unable to access money held in accounts that use the company’s technology.

The Wirecard accounting scandal has placed focus on the countries’ regulators raising eyebrows on its conduct. The scandal came at a time the watchdog was facing high-profile cases of fraud, with many questioning its ability to offer oversight on corporate giants in the country.

To bring sanity in the sector, the government has announced plans to overhaul systems put in place to manage accountancy companies. Top on the list in termination of the contract between the government and the country’s accounting agency, the Financial Reporting Enforcement Panel.

EU gets involved as Germany’s financial reputation at stake

The Wirecard bust has also attracted the attention of the EU which is set launch investigations and determine if BaFin, the Germany financial sector regulator violated any regional laws while dealing with Wirecard.

The EU has directed the European Securities and Markets Authority (ESMA) to conduct a “fact-finding analysis” with the goal of establishing a comprehensive description and assessment of the events leading to the collapse of the once first rising blue-chip company. The probe will focus on the adequacy of the supervisory response to these events, leading to the collapse of Wirecard AG.

The scandal puts Germany’s financial reputation in the EU region at risk as the situation is deemed embarrassing. Already, Chancellor Angela Merkel through her spokesperson described the case as alarming.

Prior to the collapse, Wirecard had built a reputation for offering the technology to companies and consumers to make cashless payments. The cashless payment sector is among the fast-growing competitive industries globally.

Interestingly, Wirecard’d stocks have been dropping since the start of the year. By press time, the stocks had plunged by a whopping 94.28% between January 2 and June 30. In January, the price was 112.40 while on June 30, it stood at 6.42.

There is a possibility that the company might have fallen to fraud following the arrest of former CEO and founder Markus Braun. According to the new CEO James Freis, Wirecard’s previous descriptions of its business in other countries with key partners were inaccurate. The missing $2 billion euros was supposed to be in trustee accounts at two Philippine banks but it emerged that they had no relationship with Wirecard.

The collapse of Wirecard which had expanded to Asia and North America will definitely put the focus on the management of FinTech firms globally. Regulators are bound to be more involved in supervision to avoid a similar situation in the future.

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