Germany’s Bafin bans Wirecard short positions after negative reports

BERLIN (Reuters) – Germany’s financial watchdog has taken the unprecedented step of banning short selling in shares of payments firm Wirecard, a member of the blue-chip DAX index, after reports in the Financial Times sparked high volatility in the stock over recent weeks.

FILE PHOTO: People walk past the Wirecard booth at the computer games fair Gamescom in Cologne, Germany, August 22, 2018. REUTERS/Wolfgang Rattay

Watchdog Bafin said the ban was its first such move on record for an individual stock, though it banned shorting of bank shares in 2008. Short selling is a trading tactic in which an investor borrows stock to sell in the hope of being able to buy it back later at a lower price.

“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 on Monday.

It said it had banned investors from establishing or increasing short positions in Wirecard stock until April 18.

Wirecard shares gained 9 percent at the market open after Bafin’s move.

The FT had published a series of reports alleging fraud and creative accounting at Wirecard. The company has rejected the reports as defamatory and said it would sue the newspaper.

Bafin said the company had been the subject of negative reports between 2008 and 2016 and again since late January, which caused Wirecard’s share price to drop by 40 percent.

“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.

“In recent days, there has been a further substantial increase in the net short positions”, Bafin said, adding that the events had created uncertainty in the market, particularly with regard to the appropriate price determination for Wirecard shares.

Investors holding more than 0.5 percent in short positions of a stock are obliged to publish their holdings.

According to regulatory filings, Slate Path Capital held short positions worth 1.5 percent of Wirecard’s stock as of Feb. 12, while Odey Asset Management held 0.77 percent as of Feb. 8 and Canada Pension Plan Investment Board held 0.36 percent as of Oct. 4, 2017.

Reporting by Riham Alkousaa and Arno Schuetze; Additional reporting by Alex Huebner; Editing by David Holmes

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