The Federal Financial Supervisory Authority (BaFin) hereby issues the following

General Administrative Act:

1. Establishing a net short position as well as increasing an existing net short position with reference to the shares of the following company is prohibited:

Wirecard AG (DE0007472060)

This also applies if such net short position is established or increased within a trading day.

2. Transactions by companies which fall under the exemption for market making activities pursuant to Article 17 in conjunction with Article 2(1)(k) of Regulation (EU) No 236/2012 (EU Short Selling Regulation) are excluded from the prohibitions under no. 1.

3. The General Administrative Act applies to all natural and legal persons within the meaning of the EU Short Selling Regulation which are domiciled or established in the Union or in a third country.

4. This General Administrative Act applies until 18 April 2019, 12.00 midnight CET.

5. This General Administrative Act is issued subject to reservation of revocation pursuant to section 36 (2) no. 3 of the Administrative Procedures Act (Verwaltungsverfahrensgesetz – VwVfG).

6. This General Administrative Act enters into force upon being announced on the website of BaFin.

Grounds:

The General Administrative Act is based on Article 20 of EU Regulation No 236/2012 (EU Short Selling Regulation) according to which BaFin, as the competent authority for regulating short selling in Germany pursuant to Article 32 of the EU Short Selling Regulation in conjunction with section 53 (1) of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), can take measures under Article 20 of the EU Short Selling Regulation where there are adverse events or developments which constitute a serious threat to financial stability or market confidence in Germany or in one or more other Member States, and the measure is necessary to address the threat and will not have a detrimental effect on the efficiency of financial markets which is disproportionate to its benefits.

1. Facts

Currently there are adverse events and/or developments which constitute a serious threat to market confidence in Germany: in recent days, massive uncertainties have been observed on the financial markets. This was triggered, in particular, by the share price performance of Wirecard AG in recent weeks.

Wirecard AG is a global payment service provider domiciled in Germany. The shares of Wirecard AG are admitted to trading on the Frankfurt Stock Exchange and are included in the DAX. The DAX is the most relevant German index that tracks the price development of the 30 largest and most actively traded German equities. The shares of Wirecard AG were first included in the DAX on 24 September 2018. Wirecard Bank AG, a subsidiary of Wirecard AG, is a domestic CRR credit institution.

Wirecard AG offers its customers electronic payment transaction solutions. It has connections to more than 200 international payment networks (banks, payment solutions, card networks). In addition, Wirecard AG has contracts with major credit card companies.

German companies have been the target of “short attacks” in the past; such attacks posed a risk to market integrity in Germany and to trust in fair and efficient price determination. In 2008 and 2016, Wirecard AG was also targeted by “short attacks”, through which short-sellers profited from entering into certain positions, resulting in corresponding decreases in the share price of Wirecard AG. These attacks led to investigations regarding market manipulation by BaFin and the public prosecuting authorities. The “short attacks” were followed and facilitated by negative reporting in the media.

Since the end of January 2019, there have once again been various negative reports about the company in the press. The share price of Wirecard AG has fallen sharply over the past two weeks. Between 30 January 2019 and 15 February 2019, the share price dropped from EUR 167.00 (opening price on 30 January 2019) to EUR 99.00 (closing price on 15 February 2019), which constitutes a 40% reduction in market capitalisation. A significant price drop could be observed following the publication of an article in the press claiming that the staff of one of Wirecard AG’s subsidiaries in Singapore had manipulated accounts in order to falsely report a higher turnover. The press reports have coincided with increased net short positions and with a corresponding high level of volatility in the share price of Wirecard AG. Since 1 February 2019, a significant increase in net short positions in shares of Wirecard AG has been observed, with a further sharp rise since 7 February 2019. In recent days, there has been a further substantial increase in the net short positions. These positions are held by various holders, in particular from abroad, and partially at levels below the notification threshold.

The events described above have resulted in uncertainty in the market, particularly with regard to the appropriate price determination for shares of Wirecard AG. In the current situation, there is a risk that this uncertainty will increase and escalate into general market uncertainty.

2. Legal assessment

In the current situation there is the risk that an impact exerted on the share price of Wirecard AG as a result of net short positions being entered into or existing net short positions being increased will cause excessive price movements in the share price of Wirecard AG given this company’s importance for the economy. With their trend-reinforcing effect, these price movements could additionally entail a loss of confidence in the financial markets in Germany, in particular with regard to price determination on the markets. In the present case, adverse developments which may constitute a serious threat to market confidence in Germany have been observed. These adverse developments consist in the continuous increase in net short positions in shares of Wirecard AG. The increase may result in substantial selling pressures. This presents a significant risk of a further substantial downward spiral of the share price.

The measure is necessary to address the threat since it is necessary, against the background as described, to temporarily tighten the existing prohibition of uncovered short sales pursuant to Article 12 of the EU Short Selling Regulation with reference to these shares by extending it to the establishment of net short positions and to the increase in existing net short positions without any exception being made for intraday transactions. Only such an extended prohibition will ensure that the share price of Wirecard AG is not adversely affected in the current situation as a result of net short positions being entered into or existing net short positions being increased and that the market situation will not further deteriorate as a result of such transactions. In order to achieve this aim, the prohibition must therefore apply to all persons that are domiciled or established in the Union or in a third country.

The measure will not have a detrimental effect on the efficiency of the financial markets which is disproportionate to its benefits because the prohibition is confined to Wirecard AG and does not prohibit covered short sales completely but only if on an aggregate view they lead to an increase in the net short positions. Moreover, an exemption is provided for market making activities.

The measure is issued in the exercise of due discretion because the present measure is appropriate, necessary and suitable. The measure is necessary to address the threat, and will not have a detrimental effect on the efficiency of the financial markets which is disproportionate to its benefits. This is because only such a prohibition can counter the cause of the threat brought by “short-attacks”. Furthermore, the measure is necessary since there is no obvious, more moderate measure that would be equally effective. In particular, measures under Article 23 of the EU Short Selling Regulation cannot be considered since these cannot have a comparable stabilising effect on the market due to their short-term nature. The exceptional provisions for market making activities reasonably take account of the interests of trading participants in the use of hedging instruments so that the restrictions of trading in financial instruments does not go beyond what is necessary. There are also no indications that the prohibition could be disproportionate in the stricter sense. In particular, various possibilities still remain for trading in shares of Wirecard AG and the related derivatives.

The granting of a reservation of revocation is also necessary and appropriate. The reservation of revocation gives BaFin the possibility of responding flexibly to current developments during the period of application of the General Administrative Act. This in particular makes it possible to promptly lift the ban in the event of a substantial stabilisation of the markets.

The chosen duration of the measure enables market participants to plan their trading activities with sufficient certainty over an appropriate period of time, but also allows the market to stabilise and the matter to be further clarified and evaluated.

This General Administrative Act enters into force in accordance with Article 25(3) of the Short Selling Regulation upon being announced on the website of BaFin (www.bafin.de). Due to the imminent threat, it is necessary in the public interest that this General Administrative Act enters into force immediately.

Since any actions required to prevent a threat to market confidence must be taken as quickly as possible, it has been decided, in the exercise of due discretion, to refrain from conducting a hearing prior to issuing this General Administrative Act in accordance with section 28 (2) no. 1 of the VwVfG.

Instructions on available remedies:

Objections to this General Administrative Act can be submitted to BaFin in Bonn or Frankfurt am Main within one month of its publication.

Elisabeth Roegele

Chief Executive Director of Securities Supervision/Asset-Management