Wirecard Shares Rebound as Analysts Back Company on Accounting

Wirecard AG, the German vendor of online payment software to about 9,000 companies, rebounded after plunging the most since 2002 yesterday as analysts backed the company amid speculation about the company's accounting.

``Market rumors on balance-sheet manipulation and the need for Wirecard's banking license have put the share under severe pressure,'' Bjoern Stuebner, an analyst at WestLB AG in Dusseldorf, Germany, wrote in a report today. ``We strongly believe that these rumors are unjustified.'' Stuebner cut his price estimate for the shares 21 percent to 11 euros. WestLB has a ``buy'' recommendation on the stock.

Wirecard shares advanced as much as 57 cents, or 7.4 percent, to 8.32 euros and traded at 7.90 euros as of 3:50 p.m. in Frankfurt, valuing the Grasbrunn, Germany-based company at 650.6 million euros ($1 billion). Yesterday's 30 percent slump was the biggest since November 2002.

``Obviously Wirecard is the target of an orchestrated short sale attack of several hedge funds,'' Chief Executive Officer Markus Braun said in a company statement distributed by DGAP newswire today. Germany's financial regulator, Bafin is investigating all trades of the past week, according to the statement.

In a short sale, speculators sell borrowed stock on the expectations the price will drop, allowing them to buy back the shares at a cheaper value and pocket the difference when paying back the loan.

``The speculation weighing on our share price is baseless,'' Braun said in a telephone interview yesterday. ``Our balance sheet is sound.''

Concerns the company might change its business model from IT services to traditional banking services also weighed on the stock, WestLB's Stuebner said in a telephone interview.

Banking License

With a banking license the company can process credit card transactions from its clients and doesn't have to purchase these services externally, according to Stuebner.

``The company repeatedly emphasized that there are no plans to enter other areas of the banking business,'' the analyst wrote in the report. ``Due to the fact that Wirecard actually has a banking license and since its credit card acquiring business is growing quickly in the last months, the steep increase in assets and liabilities is natural in our view.''

Wirecard ``remains a buy,'' Lars Dannenberg, an analyst at Berenberg Bank in Hamburg, wrote in a note to clients today. ``Transparency of the company's accounts is somewhat weakened by mixing the operating business with the banking activities,'' he wrote.'' His share-price estimate remains set at 13 euros.

According to Dannenberg, Wirecard's negative first-quarter operating cash flow has to be adjusted. ``Before the adjustments of banking clients' deposits, the cash flow from operating activities in the first quarter was 9.2 million euros versus 4.0 million euros in the first quarter of 2007.''

Supervisory board member Paul Bauer-Schlichtegroll bought 50,000 shares in the company at 7.98 euros today, the company said in a separate regulatory statement distributed by DGAP today.

To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net.

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Wirecard Shares Rebound as Analysts Back Company on Accounting