WSJ News Exclusive | SoftBank Saw Opportunity in Wirecard Before It Unraveled

By Margot Patrick Close Margot Patrick , Bradley Hope Close Bradley Hope and Liz Hoffman Close Liz Hoffman July 29, 2020 5:30 am ET When influential tech investor SoftBank Group Corp. 9984 1.41% backed Wirecard AG WDI 4.90% last year, it gave a $1 billion jolt to the German fintech, and temporarily quieted questions about the legitimacy of its profits.

Wirecard’s regular auditor Ernst & Young refuses to approve financial statements, says it can’t verify more than $2 billion in cash.Source: FactSet Founded and run by the risk-taking billionaire Masayoshi Son, SoftBank is a giant in the technology world. SoftBank’s $100 billion Vision Fund, launched in 2016, became the deepest pockets in the industry, but has stumbled with big bets on troubled startups such as office landlord WeWork and hotel company Oyo.

Mr. Naheta, a 39-year-old former Deutsche Bank trader, suggested a €900 million convertible bond investment. All of the risk could be parceled out to other investors, while maintaining significant upside if Wirecard’s shares performed well, according to people familiar with the deal. SoftBank set strict conditions, according to some of the people familiar with the deal. Wirecard had to address specific allegations about its accounting in deal documents with SoftBank. This included Wirecard promising that an internal spreadsheet described in Financial Times articles as evidence of accounting irregularities didn’t exist. It had to get a credit rating and issue a corporate bond as well.

Before the convertible bonds were issued, Mr. Naheta lined up Credit Suisse Group AG , to repackage the convertible bond into new securities. They were sold to hedge funds, private banks and mutual funds. Hedge fund and securities firm Citadel LLC and a BNP Paribas SA convertible bond fund were among the buyers, according to people familiar with the bond sale. Thanks to falling corporate borrowing rates and Wirecard’s elevated share price, the SoftBank strategic investment fund managed by Mr.

In mid-October, the Financial Times published excerpts of the spreadsheet Mr. Braun had told SoftBank didn’t exist, reviving concerns about the company’s accounting.

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