What's going on?
German fintech Wirecard has been told to get out… get out… of the country’s key stock market index next week so that someone else can take its spot.
What does this mean?
Back in June, Wirecard revealed that $2 billion of cash it claimed to have was missing – only to eventually concede that the money probably never existed in the first place. The company duly filed for insolvency, effectively admitting it didn’t have enough cash to meet its obligations.
Fast forward to Wednesday, and Deutsche Börse – the German stock exchange that also owns the country’s key stock market index of its 30 biggest companies – decided to give its rules a shake-up. Rather than wait for a regularly scheduled “rebalancing” – in which companies whose valuations have risen significantly swap places with those that have fallen – insolvent firms can now be booted out and replaced within a matter of days. And that’s exactly what’ll happen to Wirecard next week.
Why should I care?
For markets: Delivery Hero or Delivery Vigilante?
The biggest companies in any country are often described as “blue-chip”, given their reputation for operating profitably in times good and bad. Germany’s all-star group includes industrial conglomerate Siemens and software giant SAP, both of which analysts reckon are about to be joined by food delivery platform and lockdown beneficiary Delivery Hero. But some investors are skeptical: Delivery Hero’s never turned a profit, so its inclusion would arguably lower the resilience of the entire group.
Zooming out: Guilt trip.
Wirecard’s former CEO and a few other execs accused of fraud were arrested last month, but its chief operating officer managed to evade capture. German police even launched a widespread search for him on Wednesday, while Interpol added his name to its wanted list. Given all the hullabaloo, it’s perhaps no surprise Deutsche Börse wanted to distance itself from the company. Let’s just hope there are no skeletons in any more German industry stalwarts’ closets…