Germany bans Wirecard 'shorting' as prosecutors probe FT journalist
* Investors banned from new or raised short positions
* Bafin says Wirecard issue triggered 'massive uncertainty'
* First short-selling ban on individual stock in Germany
* Munich prosecutor investigates FT journalist
* FT says allegations "baseless and false"
* Wirecard shares gain 15 percent
(Updates with data from IHS Markit, shares)
By Arno Schuetze
FRANKFURT, Feb 18 (Reuters) - Germany's financial watchdog
has banned "short" selling of Wirecard shares due to
volatility in the payments firm's stock following reports in the
Financial Times which are now the subject of an investigation by
Munich prosecutors said on Monday they were investigating a
Financial Times journalist, confirming that they had widened a
probe into a possible violation of securities trading rules.
The Financial Times (FT) rejected as "baseless and false"
any allegations against the newspaper or its journalists of
market manipulation or unethical reporting relating to Wirecard.
A spokeswoman for the Munich prosecutors said their inquiry,
which was in response to a criminal complaint, was at an early
stage and declined to give any further details.
Bafin, Germany's financial markets regulator, said the ban
on "shorting" Wirecard was a first for an individual stock,
although it outlawed shorting of bank shares in 2008. Short
selling is when an investor borrows shares to sell in the hope
of being able to buy them back later at a lower price.
The London-based FT has published a series of reports
alleging fraud and creative accounting at Wirecard, which the
Munich-based firm has rejected as defamatory.
"The last few days have seen massive uncertainty in
financial markets. This was triggered in particular by the price
development of the Wirecard AG share in recent weeks", Bafin
said in a statement.
Shares in Wirecard, which provides payment processing
services, gained 15.1 percent in Frankfurt, partly reversing a
recent drop of 40 percent. Bafin said it had banned the taking
or increasing of short positions until April 18.
Bafin said Wirecard had been the subject of negative reports
between 2008 and 2016 and again since late January.
"The press reports have coincided with increased net short
positions", Bafin said, adding that the short positions were
held by various investors, especially from abroad, often below
the publication threshold.
A Wirecard spokesman said: "We welcome all measures of the
supervisory authorities that contribute to a quick
Wirecard, founded in 1999, has been a perennial target for
speculative short sellers who have questioned its accounting
methods and rapid international expansion.
This has caused huge volatility in Wirecard's stock, though
its share price has rebounded repeatedly, with the company last
year entering the blue-chip DAX index.
"In recent days, there has been a further substantial
increase in the net short positions", Bafin said, adding that
the events had created market uncertainty, particularly over the
appropriate price determination for Wirecard shares.
Data from IHS Markit show that at the end of last week, 12.8
percent of Wirecard shares were out on loan, which IHS Markit
said was a proxy for short positions. That is up from just 3.5
percent at the beginning of February.
Regulatory filings show that one of the firms shorting
Wirecard is Odey Asset Management, which had a short position
against 0.77 percent of Wirecard stock as of Feb. 8.
"I find it very surprising that Bafin are willing to step in
at this point in time," fund manager Crispin Odey said.
Investors must notify Bafin once their short position
exceeds 0.2 percent and those holding more than 0.5 percent are
obliged to publish this information.
In 2012 the European Union banned so-called naked short
selling, shorting securities without first borrowing a stock,
alleging shortsellers were aggravating the financial crisis.
The European Securities and Markets Authority (ESMA) said
that the Wirecard price moves constituted a serious threat to
market confidence in Germany and posed the risk of contagion.
It added that historical volatility levels spiked to 99.1
percent on Feb. 8, compared to 49.1 percent on January 29.
Traders were not convinced the ban would work.
"Thinking back to other short sell bans elsewhere, it rarely
has the desired effect," Mark Taylor, a sales trader at Mirabaud
(Reporting by Riham Alkousaa, Arno Schuetze, Jörn Poltz, and
Additional reporting by Helen Reid, Maiya Keidan, Alex Hübner
Editing by David Holmes/Alexander Smith/Jane Merriman)
First Published: 2019-02-18 08:52:17
Updated 2019-02-18 20:00:32
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