Last week saw coronavirus spikes in the USA, Germany, and China. Stock markets rallied, and then fell. Liverpool Football Club were crowned Premier League champions for the first time in 30 years. Furthermore, the main rival to Belarus's President Lukashenko was arrested, sparking nationwide demonstrations, while Covid-19 cases continued to rise in South Africa and Brazil. In Mali, President Ibrahim Boubacar Keïta was the subject of protests, demanding his resignation over a lack of control in regard to suspected Jihadist kidnappings and violence in the country. However, there were three other fascinating headlines that particularly caught my eye, and in this article, I'm going to summarise them, so that you can truly understand some of last week's most important financial news stories.
The Wirecard Scandal
Wirecard is a payment processing company, meaning that it helps websites to collect credit card payments from customers. Listed on the DAX stock exchange in Germany, Wirecard was a symbol of the era of digitalisation and the technology boom in the 2000's. However, now, it is filing for insolvency, after being caught out for fraud.
In 2015, the Financial Times noticed that Wirecard's financial accounts seemed suspicious. They had completed various odd deals in the previous years with Asian companies, and were growing their revenue at an extremely fast rate, according to their financial statements. Therefore, the Financial Times began to investigate, and noticed that there appeared to be a "€250m hole in the group’s balance sheet.”
In truth, while Wirecard defended their position, the Financial Times was right. Last week, EY refused to sign the audit documents to confirm all the financial data produced by Wirecard, as there were some €1.9bn euros missing. Wirecard claimed that the money was being held in the Philippines, but further investigation proved that the money doesn't exist. As a result, Wirecard were forced to file for insolvency, and their former CEO, Markus Braun, has been arrested on suspicion of fraud and of inflating the company's finances to make it look like they were performing better than they were.
What now for Wirecard?
Wirecard owes creditors over €3.5bn euros. Having admitted that the missing money probably does "not exist," it saw its share price plummet from €104.50 on Wednesday 17th, June, to just €1.28 now. Since the Financial Times' initial House of Wirecard series of investigations that raised concern and questions over the company, its taken five years for the payment firm's demise. The company vows to continue operating, despite its bankruptcy. However, it is hard to imagine customers flocking to use Wirecard's services after its history of fraud, false accounting, and market manipulation has been exposed.
Trump's Tulsa Tragedy
Apologies for the alliteration but I feel that it was needed to reinforce the resounding failure that Donald Trump was forced to endure this week. Anyway, the U.S. President was due to host a campaign rally last week at the BOK Arena in Tulsa, Oklahoma. From start to finish, it was a PR disaster. Initially, over the last couple of weeks, images had been circulating on social media asking for actors to take part in an 'event' in Tulsa, that coincidentally would be occurring at the same time as Trump's campaign rally. Nevertheless, thing went from bad to worse. Trump expected about one million people to attend his event in Tulsa, yet just 6,200 showed up. Finally, not only have eight of Trump's team tested positive for Covid-19 since the event, but videos have gone viral of the BOK Arena staff removing social distancing stickers at the venue, on the orders of the President's management staff.
Why does it matter?
Well, America is a country divided. Donald Trump is under increasing pressure and scrutiny following is naive and lax response to the coronavirus pandemic, which has now caused more than 120,000 U.S fatalities - about 0.04% of the American population. His refusal to wear a mask is utterly ridiculous, his drinking of bleach to protect himself from Covid-19 has been denounced by leading scientists across the world, and his determination to continue his re-election campaign rallies which effectively negate any social distancing measures, is dangerous and foolish.
Currently, polls in America suggest that sentiment towards Trump has turned increasingly negative, and his election opponent, Joe Biden, is now the favourite to be elected into office in the wintertime.
Boris's Bold Move
As a UK citizen, the last few months have been a very interesting time. Initially, Boris Johnson's response to the coronavirus outbreak was blasé, inefficient, and inconsistent. Many countries around the world had already implemented a full-blown lockdown before BoJo had even considered Covid-19 as a real threat. Then, we endured a seemingly endless period of lockdown, quarantine, isolation, and uncomfortable afternoon walks with immediate family members. Gradually, measures have been eased, and, as of July 4th, England will be largely back to normal. Restaurants and pubs will be allowed to reopen, with social distancing measures in place. The large population of us who have experimented with buzz cuts, Tarzan-like long locks, or a mix of both, will be allowed to our favourite barbers to get our hair cut professionally.
This is a bold move, but is it wise? While daily deaths from Covid-19 are falling in the country, positive test rates are still very high. Many feel that the move is rushed and unnecessary. Sure, most of us are desperate for a pint at the local pub or a slice of pizza at our local joint. However, there is a general feeling among the more cautious among us that it is a rash decision, that the Prime Minister is prioritisng the reopening of the economy and the hospitality industry over the health and well-being of our population. Without a doubt, Boris is aware that an increasingly large number of people are frustrated and fed up of the situation, and are turning a blind eye to many laws and rules. But by succumbing to the will of these people, the PM is only reinforcing the inconsistent policy that has defined the last few months. And don't even get me started on the one-metre plus social distancing rule!
In years to come, Boris Johnson's reign will either be regarded as a great success or a great failure. The inconsistency that has marred his response to the pandemic in the last few months would suggest the latter, and if his decision to relax social distancing measures to save businesses leads to a second potent spike of Covid-19 that scientists believe is inevitable, Johnson's fate and status as an inconsistent and incompetent, careless risk-taker that led the country to an intolerable and excessive amount of deaths, will be all but secured.