It’s Down To The Wire For Wirecard

Call it a case of death by a thousand cuts.

Job cuts. And cutting loose operations. And cost cuts.

What will be left of Wirecard Card Solutions? What will be left of Wirecard?

The company said this week that it would sell its United Kingdom operations to Railbank. Though the terms of the agreement were not disclosed, the pact seems far-reaching in scope. The sale includes the operations that underpin the running of 50 card programs across the globe. In addition, as noted in this space, the transfer of customer accounts will take place through November.

And in other cuts – call them carvings, perhaps – the company has agreed to sell its Brazilian business to Sao Paulo-based PagSeguro Digital, among the nation’s largest mobile payment-based eCommerce companies.

The sales come after Wirecard’s June filing for insolvency. The company admitted that 1.9 billion euros ($2.1 billion) said to have been deposited into two Philippines banks did not exist.

And now come the job cuts – where, according to reports, the insolvency administrator may make a move to lay off hundreds of the roughly 1,500 employees around the globe (Bloomberg reports that other staffers plan to resign). Ultimately, there may be about 500 workers still tied to the firm’s operations after the layoffs.

And yet, in at least some respects, the show will go on – at least a little bit.

Even for its bank. Back in June, the company said in a statement that “payouts to merchants of Wirecard Bank will continue to be executed without restrictions. The management board is of the opinion that continuation is in the best interests of the creditors. With the exception of a small development branch office, no insolvency applications have been filed by (Wirecard) Group companies at present.”

We note that insolvency need not mean that a company ceases to exist – not if pieces are of value hither and yon. In one June announcement, Wirecard said it was collaborating with Stocard, a B2C European FinTech firm, to launch a new mobile payment feature in the Stocard app. Stocard (the firm) says it reaches 50 million users across the globe.

Some of the agreements, such as the one in Brazil, have been struck on principle, which means that a lot can happen between now and consummation.

But valuing assets also means ascribing value. In the latest set of financial results, net goodwill was the largest asset on the balance sheet, at roughly 725 million euros. Generally speaking, goodwill is a premium over what would be an estimated market value of the assets acquired (it’s the premium over book value). Goodwill, of course, could conceivably be impaired, or written down, which means the balance sheet weakens, as does the “value” of those companies. Elsewhere, the sales process for the North American operations reportedly continues, and the high-wire Wirecard saga continues.