German payments firm Wirecard’s SoftBank ties come under scrutiny

Two Wirecard AG branded red cubes rest between computer cables in this arranged photograph at the Wirecard headquarters in Munich, Germany, on Wednesday, Sept. 5, 2018. Photographer: Matthias Doering/Bloomberg

An ongoing accounting scandal at German payments company Wirecard is putting its ties with Japan’s SoftBank Group under fresh scrutiny 14 months after the companies announced a “large-scale strategic partnership.”

Wirecard, which was one of Germany’s biggest listed companies, said on Monday that 1.9 billion euros ($2.1 billion) in trust account balances in Asian banks likely “do not exist.” Shares in Wirecard have lost more than 80 per cent of their value since Thursday when the company described the money as missing.

SoftBank and Wirecard announced their partnership in April 2019, when Wirecard also said an “affiliate of SoftBank” would invest 900 million euros via convertible bonds. The deal helped to boost market confidence in the German group and was approved by Wirecard shareholders about two months later.

Sources have told the Nikkei Asian Review that the investment did not come from SoftBank itself but from a fund managed by a SoftBank subsidiary, which the Japanese tech conglomerate did not invest in. As a result, the Japanese conglomerate will be largely unaffected by the sharp decline in Wirecard’s shares.

Questions remain over how deep Wirecard’s relationship with SoftBank was intended to be. In addition to the SoftBank-linked investment, the news release last year touted the partners’ cooperation as a way to help Wirecard expand to Japan and South Korea, as well as offer opportunities to collaborate with SoftBank’s portfolio companies.

While SoftBank’s mobile unit has set up joint ventures in Japan with many SoftBank investment targets, including WeWork, Chinese ride-hailing company Didi Chuxing and Indian hotel startup Oyo, none with Wirecard has materialized.

A SoftBank spokesperson declined to comment. Wirecard did not immediately respond to a request for comment.

SoftBank Chairman and CEO Masayoshi Son is under pressure ahead of the group’s annual shareholder meeting on Thursday, after the largest annual loss in the group’s history. The company booked losses on a string of holdings in its Vision Fund, a $100 billion vehicle to invest in tech companies.

The Wirecard turmoil has rippled across Asia. On Sunday, Philippine central bank Gov. Benjamin Diokno said “none of the missing $2.1 billion of German firm Wirecard entered the Philippine financial system.”

On Monday, BDO Unibank and Bank of the Philippine Islands said in local stock exchange filings that Wirecard is not a client. BDO and BPI had been named in news reports as the institutions where Wirecard had made deposits.

Additional reporting by Cliff Venzon in Manila

This article was first published in Nikkei Asian Review.

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.