Wirecard has a problem. The company has “misplaced” more than $2 billion. That’s a little worse than misplacing your credit card, and the stock is down more than 80% over the past five days. The move has wiped out about $19 billion in market value.
The eye-popping numbers don’t stop with the drops. Now the enterprise value of the company, which is essentially market capitalization plus debt, is negative $89 million in Monday trading. The company is worth less than zero right now. That’s not typical, but neither is losing $2 billion.
Watching the stock tumble gets our inner trader wondering if there’s something to be done. But then we remember that Wirecard isn’t like other “value” investments. Investors don’t get to check corporate bank statements, so there’s a lot of trust implied in financial markets.
Once it’s gone, it’s hard to regain.
Wirecard Debacle Deepens
The German fintech company said on Monday that there was now “a prevailing likelihood” that the 1.9 billion euros ($2.1 billion) it said last week were missing “do not exist,” sending the company’s share price tanking by more than a third on the Frankfurt stock exchange.
- The CEO of the payment company, plagued for months by allegations about dubious accounting practices, had resigned abruptly last week after two banks Wirecard alleged held the money on its behalf said they didn’t hold the funds.
- The Wirecard board said that it was considering steps on how to keep operating the company, which has lost more than €10 billion in market capitalization in the last two trading days. It insisted that it is holding “constructive discussions” with its creditors.
- The company has withdrawn the preliminary results it published earlier for 2019 and the first quarter of 2020.
What’s Next: Questions are only beginning to be raised about the actions of German regulators in the debacle. Initially, regulators targeted critics of Wirecard and banned bets against shares of the company, which was once the high-tech pride of German business and finance.
Trump Tries a Campaign Reboot
Behind in polls and facing a resurgence of the pandemic in several states along with ongoing protests, President Donald Trump held his first campaign rally since early March on Saturday in Tulsa, Okla. Attendance fell far short of the campaign’s expectations.
- Aides initially said there were more than a million requests for tickets to the event, but attendance came in at 6,200 people in the 19,000 seat stadium, the Tulsa Fire Department said.
- The Trump campaign said that attendance was hurt by “radical protesters,” while users of the video app TikTok and fans of Korean pop music claimed that they submitted droves of fake ticket requests in order to drive down attendance.
- However, it’s unclear how those ticket requests contributed to the smaller-than-expected crowd because the Trump campaign allowed an unlimited number of ticket requests.
- In his speech, President Trump said he asked his team to slow down Covid-19 testing because it made the outbreak in the U.S. appear larger, but a White House official later said Trump was joking. The president also referred to the virus as “Kung-flu.”
“You know it was tongue-in-cheek. That was tongue-in-cheek, please... It was a light moment.” – White House trade adviser Peter Navarro, explaining the president’s comments on slowing down testing in an interview with CNN
What’s Next: Trump’s next rally is in Phoenix on Tuesday. Even as local restrictions are lifted, people may be reluctant to gather en masse.
Sports Leagues Struggle To Move Forward
Rising Covid-19 cases are threatening to disrupt plans to get delayed sports leagues back in action. While leagues have developed plans that call for the reopening of team facilities before slowly phasing in larger team practices, many of those policies have been disrupted by Covid-19 cases.
- Major League Baseball has closed all 30 teams’ spring training sites after an outbreak at the Philadelphia Phillies’ training facility saw eight players and staff test positive for Covid-19. The New York Mets and Yankees have already left their practice facilities in Florida and are now training at Citi Field and Yankee Stadium in New York City.
- Crowds in the stands are out of the picture, but with the rise in cases—the U.S. reported the most new cases since May 1 on Saturday and 22 states saw an increase in Covid-19 patients—staff and families face the risk of infection.
- The total U.S. caseload hasn’t fallen significantly, with the total number of cases now near April’s peak, and numbers are surging in California, Florida, and Texas, the three most populous states.
- White House trade adviser Peter Navarro told CNN’s Jake Tapper that the Trump administration is preparing for the possibility of a second wave of coronavirus infections in the fall. “You prepare for what can possibly happen,” Navarro said, adding that he’s not saying a second wave will happen.
“At this point it’s going to be a challenge if you keep having teams that keep having outbreaks of cases within their players. At some point, we’ll hopefully have a situation where we won’t have all that transmission, but I think it is going to very, very difficult at this point to protect players, protect their staff, coaches, to protect the public.” – Dr. Michael Osterholm, director of the University of Minnesota’s Center of Infectious Disease Research and Policy at the University of Minnesota, said Sunday in an interview on NBC’s Meet the Press
What’s Next: With cases rising in several big sports states, the safest reopening strategy for the leagues involves operating in a bubble, a controlled area where all teams stay and get tested regularly. The National Basketball Association’s bubble is at Disney World in Orlando, while the National Hockey League plans to operate out of two, yet-to-be-announced hub cities.
On the Job But Not Going Back to Work
White collar workers are wary about going back to the office and their corporate employers are similarly cautious about allowing them to return. That’s particularly true in New York as the city emerges from the country’s worst coronavirus outbreak and enters the second phase of its reopening today and all office workers are allowed to return.
- New York City’s Phase 2 reopening allows workers to go back to the office today, but just 10% to 20% of Manhattan’s white collar workers will actually be back, New York real-estate brokers and landlords told The Wall Street Journal. Overall, the city estimates that 150,000 to 300,000 workers will return to their jobs as part of Phase 2 reopening.
- Both employees and executives are in many cases worried not just about how to effectively social distance in a full office, but also about commuting on mass transit or dealing with what may be a longer commute by car as people avoid mass transit.
- Private sector workers aren’t the only ones trepidatious about going back to the office. Seventy-five percent of federal employees and government contractors who are currently working from 亚游真人官方网站home are very or slightly uncomfortable returning to the office, according to a survey conducted by the Federal News Network.
What’s Next: Reluctance to go to an office is fairly widespread among white collar workers. Georgia is still more than 25% below its pre-pandemic level of office building visits, the Journal notes. A survey by real-estate trade group CoreNet Global found that just 15% of companies said that they’d return to pre-outbreak levels in the next six months.
U.K. Government Mulling Both VAT Cuts and Tax Increases
Rishi Sunak, the British finance minister, is considering another stimulus in the form of a VAT cut to encourage consumers to spend on restaurants and other hospitality businesses. But it is also eyeing tax rises at a later stage to keep public finances under control, the Financial Times writes.
- The U.K. government is reviewing the 2-meter social distancing rule with a view of bringing it to 1 meter, and is due to announce this week which businesses will be allowed to reopen on July 4.
- According to the Financial Times, Sunak is planning to make up for the budgetary cost of a cut of the VAT rate—currently at 20% for most items —with tax increases and spending cuts to be announced in the fall.
- Germany last month cut its 19% standard VAT rate to 16%, on a temporary basis, in order to stimulate consumer spending as the economy is exiting its three-month lockdown.
What’s Next: Sunak seems to make the political choice of bringing the national budget under control without waiting, as the country’s public debt-to-GDP has now risen to 100%. There would be an economic risk if the future tax hikes and spending cuts are implemented too soon, before the economy has fully recovered.
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