Security & Fraud

SoftBank Wants Out Of Wirecard Partnership After Last Year’s $1B Investment

SoftBank is looking to put distance between itself and Wirecard due to the German payments company's ongoing scandal involving missing money and cooked books, The Wall Street Journal (WSJ) reported.

The relationship between the two involves a $1 billion investment that SoftBank helped Wirecard arrange. The Japanese bank, one of the world's largest tech investors, struck a deal for a five-year partnership with Wirecard in April of 2019, which it now wants to terminate, WSJ reported.

The agreement was for Wirecard to become affiliated as a digital payments provider for other companies in SoftBank’s massive base of tech firms, and for SoftBank to help Wirecard expand in Japan and South Korea.

There were some benefits to the program already being seen in July of 2019, when Wirecard was hooked up with a deal with European car buying and selling platform AUTO1 Group, which SoftBank had also invested in. And in August, Wirecard was in talks with other SoftBank-backed entities, including Oyo Hotels & Homes and Grab.

The $1 billion investment from a SoftBank-affiliated vehicle through a convertible bond came at the same time as the deal, an odd deal to make as SoftBank put in none of its own actual funds when the deal closed later in the year.

Both the convertible bond and the deal were a boost for Wirecard last year, with the company’s stock price under pressure after a whistleblower allegation of questionable accounting practices. Wirecard denied those allegations at the time. However, in the past few weeks, the company’s alleged mismanagement came to the forefront with a missing $2 billion on the bank’s books that might not even exist.

In a statement to WSJ, a spokesman for AUTO1 Group said the partnership had never gone beyond preliminary talks.

Last week, SoftBank said it had pushed for Wirecard to look into a special auditor for the allegations against it, and in an email from October last year, said that could have helped “put the allegations behind the company once and for all and draw a line under the unwanted distraction that continues to plague the company,” the email says, as quoted by WSJ.

Other fallouts are already happening around Wirecard — Mastercard and Visa are "rethinking" their agreements, and Orange has said it might end its agreement by the end of the summer due to the ongoing scandal.

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