Well, as I anticipated in my last blog post, the CEO of Wirecard AG, Markus Braun, has been arrested in Munich after authorities uncovered the fact that over $2 billion dollars on its balance sheet never existed.
"Wirecard AG’s recently departed chief executive, Markus Braun, was arrested by police, days after the German payments company revealed a $2 billion hole in its books.Munich city prosecutors said he was arrested late Monday on suspicion of presenting false information. It was a swift turn of events for Mr. Braun, who was Wirecard’s largest shareholder and served as CEO for nearly two decades until resigning last Friday.The arrest is the latest rapid-fire blow for the company at the center of what appears to be Europe’s largest fraud in years. The company began to unravel last week when its auditors said that they couldn’t verify the money existed."
The shock waves from this scandal reverberate far beyond Wirecard and its investors. It shines a spotlight on all DAX-listed companies and the effectiveness of financial oversight and governance of German corporations. In particular it calls into question the value of the Deutscher Corporate Governance Kodex. Germany's Finance Minister Peter Altmaier (CDU) expressed shock that such a scandal could happen in Germany:
„Wir hätten eine solche Situation überall erwartet – nur nicht in Deutschland. Deshalb müssen wir, wo notwendig, hart durchgreifen.“
„Der Fall Wirecard macht deutlich, dass die Deutsche Börse dringend eine Reformdebatte anstoßen muss“, sagte der Vorstandsvorsitzende der Vereinigung der Aufsichtsräte in Deutschland (VARD), Peter Dehnen, und er fügte hinzu: „Wir brauchen in Deutschland einen starken Kapitalmarkt, und deshalb wünschen wir uns, dass die Deutsche Börse mit ihrer neuen starken Führung im Stil der Nasdaq die Diskussion über Standards guter Unternehmensführung vorantreibt – gemeinsam mit Aufsichtsräten und Vorständen.“
It is true that Nasdaq may have a better track record than the DAX. Back in September the tech start-up WeWork attempted to launch an IPO with a valuation of $49 billion. After investors examined the prospectus the company was forced to withdraw the IPO. Today the valuation of WeWork is more in the range of $2 billion.
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