>>> US After Hours Summary: USNA +15.4%, MODN +13.2%, LYFT +10.5% higher on earn

After Hours Summary: USNA +15.4%, MODN +13.2%, LYFT +10.5% higher on earnings; AYX -8.8%, AKAM -7%, CSCO -5.4% lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: USNA +15.4% (also authorizes $150 mln share repurchase program), MODN +13.2%, LYFT +10.5%, CCK +7.8%, OI +6.4%, ENPH +5.9%, URBN +5.9%, RICK +5.8%, STEP +4.6%, THC +3.8%, QGEN +3.6%, MESA +3.5%, GPRE +3.2%, TWTR +2.6%, MAT +2.3%, TWO +2.3%, BW +2.3% (also announces stock offering), RPD +2%, YELP +2%, BKH +0.1%, PRI +0.1% (also raises dividend; approves new buyback),

Companies trading higher in after hours in reaction to news: GNFT +103.8% (positive results from the Ph 2 clinical trial evaluating elafibranor), GMDA +71.6% (presents Phase 3 data on omidubicel; anticipates BLA submission in 2H21), KALV +3.3% (stock offering), MTCH +2.4% (to acquire Hyperconnect for US$1.725 bln in cash and stock), FULT +1.7% (approves $75 mln stock repurchase program), IVZ +1.4% (reports Jan AUM data), KTOS +1.1% (stock offering), WYNN +0.9% (WynnBET receives conditional approval for online sports betting in Tennessee), MRNA +0.7% (announces vaccine supply agreements with Taiwan and Colombia), SRG +0.2% (new CEO), IBM +0.2% (Instacart acquires over 250 patents from IBM), APAM +0.1% (reports Jan AUM data), SQZ +0.1% (stock offering),

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: CPSI -13.4%, AYX -8.8%, ATEN -8.7%, AKAM -7% (also announces organizational changes), PAA -7%, CDAY -6.9%, CSCO -5.4% (also raises dividend), NCR -4%, NGL -3.6%, FMC -3%, DCPH -2.7%, VOYA -2.6%, MTW -2.5%, FISV -1.7%, EXTR -1.4%, WELL -0.9%, REYN -0.8% (also raises dividend), G -0.3% (also announces $500 mln increase to share repurchase auth; and 10% dividend increase), DEI -0.2%, HIW -0.2%,

Companies trading lower in after hours in reaction to news: VNRX -12% (stock offering), XONE -9.2% (stock offering), ENLV -8.7% (announces $10 mln bought deal offering), LMB -7.9% (stock offering), BLDP -6.4% (announces $350 mln bought deal offering), CDAK -4% (stock offering), MREO -2.3% (ADS offering), ONCR -2.2% (stock offering), SNY -0.6% (FDA approves Libtayo as immunotherapy for patients with advanced basal cell carcinoma), VRNS -0.3% (files for mixed securities shelf offering),

>>> US Close Dow -0.03% S&P -0.11% Nasdaq +0.14% Russell +0.40%

Closing Stock Market Summary

Each of the major indices set intraday record highs on Tuesday, but only the Nasdaq Composite (+0.1%) and Russell 2000 (+0.4%) closed at record highs. The S&P 500 (-0.1%) and Dow Jones Industrial Average (-0.03%) snapped their six-session winning streaks with fractional declines. 

Today's price action suggested the market was consolidating its February rally in which the S&P 500 rallied more than 5% in the prior six trading sessions. Most sectors flipped between modest gains and losses today, except for the energy sector (-1.5%), which declined 1.5%. 

The materials (-0.7%) and consumer discretionary (-0.6%) sectors also underperformed, while the real estate (+0.5%) and communication services (+0.2%) sectors showed relative strength. Broader selling interest was muted, as investors respected the positive macro factors in the market. 

To rehash, these factors included increasing COVID-19 vaccination rates and decreasing infection/hospitalization rates, low interest rates, optimism surrounding another fiscal stimulus bill, and better-than-expected earnings reports. 

Take-Two Interactive (TTWO 200.31, -13.03, -6.1%) and DuPont (DD 73.48, -2.28, -3.0%) were among the latest companies to exceed earnings expectations and issue upbeat guidance, but the reactions were disappointing. Nucor (NUE 54.68, +0.98, +1.8%) raised Q1 EPS guidance well above consensus estimates due to positive economic trends and robust demand in the steel industry. 

Separately, Electronic Arts (EA 146.11, +3.65, +2.6%), a competitor to TTWO, announced plans to acquire Glu Mobile (GLUU 12.67, +3.28, +34.9%) for $12.50/share in a cash deal worth $2.1 billion in enterprise value. The deal was a 36% premium to GLUU's closing price on Feb. 5. 

U.S. Treasuries finished little changed in a tight-ranged session. The 2-yr yield increased one basis point to 0.12%, and the 10-yr yield finished flat at 1.16%. The U.S. Dollar Index fell 0.5% to 90.46. WTI crude futures increased 0.7%, or $0.38, to $58.35/bbl.

Reviewing Tuesday's economic data:

  • Job openings increased to 6.646 million in December from a revised 6.572 million in November (from 6.527 million).
  • The NFIB Small Business Optimism Index decreased to 95.0 in December from 95.9 in November.

Looking ahead, investors will receive the Consumer Price Index for January, the Treasury Budget for January, Wholesale Inventories for December, and the MBA Mortgage Applications Index on Wednesday.

  • Russell 2000 +16.4% YTD
  • Nasdaq Composite +8.7% YTD
  • S&P 500 +4.1% YTD
  • Dow Jones Industrial Average +2.5% YTD

Challenges : Suez-Veolia: Antoine Frérot gives priority back to shareholders

Suez-Veolia: Antoine Frérot gives priority back to shareholders
By Vincent Beaufils on 02.09.2021 at 2:00 p.m.
EDITORIAL - By launching his takeover bid on Suez, the CEO of Veolia is choosing shareholder democracy. Against the position of Bruno Le Maire, but also in contradiction with his deep choices.

Who will decide? Hostilities resumed on February 8 in the fight between Veolia and Suez, the global environmental giants, who must have the last word: to the shareholders of Suez, coveted by Veolia, who will be convened to a general meeting of here at the end of June; to justice, which is due to rule on February 18 on the hostile takeover bid, blocked in summary proceedings; to the market authorities, who have one month to decide; Or to the Minister of Economy and Finance, who threw himself in the face of an unfriendly operation?

Antoine Frérot, the yet placid CEO of Veolia, burned his ships by submitting his proposed offer for the 70.1% of Suez that he does not have, thus breaking his "unconditional commitment not to submit a hostile offer" , taken four months ago. It must be said that Suez took advantage of the period to do everything and try to escape the grip of its competitor by pushing the fires of a counter-takeover bid. As if in a couple trying to mend, one of the spouses happily continued to live his adventures elsewhere. Frérot certainly has the slowness and robustness of a diesel in appearance, but he has the wisdom and sagacity of a lover of the primitive arts. His only deadline, he knows, is the Suez assembly, by the end of the first half of the year. There, the shareholders will be counted; there, they will eventually decide to overthrow the board if they feel the directors have played against their interests. Are they not, after all, the owners?

Shareholder democracy
This choice of shareholder democracy, however, goes against all the theses developed for several years by the CEO, who is also president of the Institut de l'Entreprise. In this forum and elsewhere, a fairly visionary Antoine Frérot often defends a company "which is in the general interest, and does not only serve the interests of the owners and the shareholders", failing which capitalism runs its course. loss. At the forefront of "stakeholders who must find their account", obviously the employees, and those of Suez row thoroughly against the takeover bid of Veolia, placing its CEO in a contradiction that all the advertising posters extolling the merits of the operation will fail to erase.

But the priority given to shareholders at least frees itself from the cumbersome tutelage of the minister. We do not indeed see by what right Bruno Le Maire is invited into this debate. Suez and Veolia are two private companies. The competition authorities in Brussels are seized, and that is why the French assets of Suez are already pledged to a long-term investment fund that has proven itself. With the Economy, Finances and the Recovery, there is enough to do so that our Minister does not once again improvise the Minister of Mergers and Acquisitions.

Challenges : Suez-Veolia: Antoine Frérot redonne la priorité aux actionnaires

Suez-Veolia: Antoine Frérot redonne la priorité aux actionnaires
Par Vincent Beaufils le 09.02.2021 à 14h00ABONNÉS
EDITO - En lançant son OPA sur Suez, le PDG de Veolia fait le choix de la démocratie actionnariale. Contre la position de Bruno Le Maire, mais aussi en contradiction avec ses choix profonds.

Qui va décider ? Les hostilités ayant repris le 8 février dans le combat que se livrent Veolia et Suez, les géants mondiaux de l’environnement, à qui doit revenir le dernier mot : aux actionnaires de Suez, convoité par Veolia, qui seront convoqués en assemblée générale d’ici fin juin ; à la justice, qui doit statuer le 18 février sur l’OPA hostile, bloquée en référé ; aux autorités de marché, qui ont un mois pour se prononcer ; ou au ministre de l’Economie et des Finances, qui s’est jeté en travers d’une opération inamicale ?

Antoine Frérot, le pourtant placide PDG de Veolia, a brûlé ses vaisseaux en déposant son projet d’offre sur les 70,1 % de Suez dont il ne dispose pas, rompant ainsi son "engagement inconditionnel à ne pas déposer d’offre hostile", pris il y a quatre mois. Il faut dire que Suez a bien profité de la période pour tout faire et tenter de se soustraire à l’emprise de son concurrent en poussant les feux d’une contre-OPA. Comme si dans un couple essayant de se rabibocher, un des conjoints continuait allégrement à vivre ses aventures ailleurs. Frérot a certes en apparence la lenteur et la robustesse d’un diesel, mais il a la sagesse et la sagacité d’un amoureux des Arts premiers. Sa seule échéance, il la connaît : l’assemblée de Suez, d’ici la fin du premier semestre. Là, les actionnaires se compteront ; là, ils décideront éventuellement de renverser le conseil s’ils jugent que les administrateurs ont joué contre leurs intérêts. Ne sont-ils pas, après tout, les propriétaires ?

Démocratie actionnariale
Ce choix de la démocratie actionnariale va pourtant à l’encontre de toutes les thèses développées depuis plusieurs années par le PDG, par ailleurs président de l’Institut de l’entreprise. Dans cette enceinte et ailleurs, un Antoine Frérot assez visionnaire fait souvent l’apologie d’une entreprise "qui est d’intérêt général, et ne sert pas seulement les intérêts des patrons et des actionnaires", faute de quoi le capitalisme court à sa perte. Au premier rang des "parties prenantes qui doivent trouver leur compte", évidemment les salariés, et ceux de Suez rament à fond contre l’OPA de Veolia, plaçant son PDG dans une contradiction que tous les placards publicitaires vantant les mérites de l’opération ne parviendront pas à effacer.

Mais la priorité redonnée aux actionnaires permet au moins de s’affranchir de la tutelle encombrante du ministre. On ne voit en effet pas de quel droit Bruno Le Maire s’invite dans ce débat. Suez et Veolia sont deux entreprises privées. Les autorités de la concurrence de Bruxelles sont saisies, et c’est pour cela que les actifs français de Suez sont déjà promis à un fonds d’investissement de long terme qui a fait ses preuves. Avec l’Economie, les Finances et la Relance, il y a suffisamment à faire pour que notre ministre ne s’improvise pas une nouvelle fois celui des Fusions-Acquisitions.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • KFRC -8.8%, WCC -8.2%, DHT -7.3%, OPCH -7.3% (also announces stock offering), COTY -6.5%, CORT -5.1%, CDK -5%, LMNX -4.9%, CARR -4.8%, TTWO -4.7%, HQY -4.7%, ACM -3.9%, AMKR -3.3%, NUAN -3% (also announces acquisition of Saykara), RAMP -2.6% (also to acquire DataFleets), JKHY -2.6%, NRZ -2.2%, LCII -2.1%, TOT -1.7%, CNC -1.4%

Other news:

  • EKSO -20.6% (prices offering of 3,902,440 shares of common stock at $10.25 per share)
  • ZOM -18.9% (prices offering of 91,315,790 common shares at $1.90 per share)
  • CLF -8.1% (prices offering of 60 mln shares of common stock; gross proceeds for CLF of approximately $326 million)
  • LBRT -7.6% (prices offering by selling shareholders of 8.7 mln shares of common stock at $11.45 per share)
  • OPCH -7.3% (prices offering of 15 mln shares of common stock at $18.50 per share)
  • IPWR -6.2% (prices offering of 1,176,500 shares of common stock at $17.00 per share)
  • OSH -5.4% (stock offering)
  • IRDM -4.4% (to be added to the S&P MidCap 400)
  • AQUA -4.3% (announces the pricing of a secondary public offering of 16,382,793 shares of its common stock by certain institutional shareholders of the company, including certain affiliates of AEA Investors LP, which is expected to result in gross proceeds of approximately $407.1 mln)
  • NNOX -3.5% (stock offering)
  • SIEN -2.8% (prices offering of 5,410,628 shares of its common stock at $6.75 per share)
  • LSPD -2.1% (launches public offering of 7 mln subordinate voting shares),
  • OPRX -2% (stock offering)
  • LESL -1.8% (stock offering)
  • NNDM -1.2% (ADS offering)

Analyst comments:

  • ESPR -3.2% (downgraded to Sell from Neutral at Goldman)
  • MTDR -1.9% (downgraded to Neutral from Buy at MKM Partners)
  • LADR -1.5% (downgraded to Underweight from Neutral at JP Morgan)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • SLQT +14.9%, BECN +6.5%, IIVI +5.4%, GT +5.3%, VRNS +5.1% (also announces 3-for-1 stock split), CHGG +4.1%, OMF +3.5%, CAMT +3.1%, IT +2.7%, BBDC +2.4%, HAIN +2.4%, SEE +2.2%, SPG +2.1%, HBI +2%, EPC +1.8%, ARMK +1.8%, MBUU +1.7%, SPGI +1.7%, INCY +1.5%, HMC +1.2%, CGC +1.1%, AVYA +1.1%, BLKB +0.9%, J +0.8%, DD +0.7%, MLM +0.7%

 Other news:

  • KALV +178.9% (announces "positive" topline data from a Phase 2 clinical trial demonstrating statistically and clinically significant efficacy of KVD900 as an oral on-demand treatment for hereditary angioedema attacks)
  • HTBX +62.7% (reports positive interim data of the co's fully-enrolled Phase 2 trial of HS-110)
  • GLUU +33.3% (EA to acquire GLUU for $12.50/sh in cash; also reported earnings)
  • TLRY +19.3% (established an agreement with Grow Pharma to import and distribute Tilray's medical cannabis products into the United Kingdom)
  • IRWD +12.8% (CEO departs),
  • COLL +11.9% (to be added to the S&P SmallCap 600)
  • GRNV +11.5% (to combine with Helbiz; deal includes $30 mln PIPE investment)
  • NCTY +9.4% (enters into a $100 mln SEDA to fund business growth)
  • FRLN +8.3% (presents data on its Gaucher Disease and Fabry Disease AAV-Based Gene Therapies)
  • ORTX +7.3% (announces new data from several of its hematopoietic stem cell gene therapies in development for neurodegenerative disorders, including interim data on multiple clinical outcomes for OTL-203 in MPS-I, encouraging preliminary biomarker data for OTL-201 in MPS-IIIA and natural history data in MLD)
  • IPHA +6.3% (announced new clinical developments for its first-in-class, proprietary investigational asset, lacutamab, an anti-KIR3DL2 cytotoxicity-inducing antibody in development for T-cell lymphomas)
  • SAIC +6.3% (awarded $830 mln Army contract for Aviation Systems Engineering Services)
  • AVIR +5.8% (announces publication of preclinical data for AT-5270)
  • TIGR +5.6% (announces $65 mln private placement of convertible notes)
  • IPI +4.3% (announces $50 increase to potash price)
  • AFMD +4.2% (Point72 Asset Mgmt discloses 4.8% stake (prior 1.72%))
  • VERI +2% (continues international expansion through agreement with Lima, Peru-based commercial radio group, CRP Radios)
  • MPWR +1.7% (to be added to the S&P 500)
  • TEN +1.3% (Carl Icahn lowers active stake following the recent sale)
  • BIDU +1.3% (develops first multi-modal autonomous driving MaaS platform in Guangzhou)
  • TGTX +1.3% (license partner Rhizen Pharmaceuticals AG receives FDA accelerated approval for Umbralisib for adult patients with relapsed or refractory MZL & FL)
  • AMRN +1.1% (provides update on regulatory review processes for Vascepa in Mainland China and Hong Kong)

Analyst comments:

  • TWLO +2.6% (upgraded to Overweight from Neutral at JP Morgan)
  • KREF +2.3% (upgraded to Overweight from Neutral at JP Morgan)
  • EQR +1.4% (upgraded to Buy from Neutral at BofA Securities)
  • HSBC +1% (upgraded to Neutral from Underperform at BofA Securities; upgraded to Sector Perform from Underperform at RBC Capital Mkts)

WSJ : Trump Partner Exploring Ways to End Relationship With Ex-President’s Compa

Trump Partner Exploring Ways to End Relationship With Ex-President’s Company
Vornado considers step after efforts to sell, refinance office towers misfired, possibly due to Trump stake

One of the nation’s biggest real-estate investors, which is run by a longtime friend of Donald Trump, is exploring ways to end a lucrative partnership with the former president’s real-estate company, people familiar with the matter said.

The partnership includes two of the Trump Organization’s most valuable assets. Losing them would shrink the Trump Organization’s business, just as it has struggled with the decline in travel and leisure spending due to the coronavirus pandemic. A sale could benefit Mr. Trump’s businesses, which have more than $400 million in debt due in the next few years.

Vornado Realty Trust executives have recently had internal discussions about buying out the Trump Organization’s 30% stakes in an office tower in Midtown Manhattan and in a property in San Francisco’s financial district that the companies jointly own, people familiar with the matter said. Vornado tried unsuccessfully to sell the properties last year. A plan to refinance them was shelved.

When no buyers or lenders stepped up, the firm grew concerned that they were staying away because of the Trump Organization’s stake, said people familiar with the matter.

Vornado has weighed finding a reason to withhold income generated by the properties from the Trump Organization, a move that could force a confrontation that sends both parties to court and accelerates a separation, these people said.

The fate of the partnership shows the uncertainty facing the Trump Organization as parts of corporate America have sought to distance themselves from Mr. Trump. If Mr. Trump’s businesses run into financial trouble, or if he needs to sell prize assets to pay off his debt, it could also weigh on his political future.

Vornado is run by Steven Roth, one of the country’s foremost real-estate investors and a longtime friend of Mr. Trump. Mr. Roth has played golf with Mr. Trump and attended his wedding to Melania Trump. The Vornado chief actively supported the former president during his time in the White House, even after some other corporate executives backed away.

A person close to Mr. Roth said no formal offer for the Trumps’ stake was ever made. A Vornado spokeswoman said the firm declined to comment on the sale or refinancing efforts.

In a brief interview Monday, Mr. Trump said, “Vornado has been an excellent partner so far and we expect that to continue.”

He declined to comment on whether Vornado had offered to buy out the Trump Organization’s stakes in the two properties and described them as “two of the best buildings in this country.” He added that he believed the Trump Organization has low debt levels as a company relative to its high-quality assets.

Vornado sought to cash out of the properties—top-quality office buildings located at 1290 Avenue of the Americas in Midtown Manhattan and 555 California Street in San Francisco’s financial district—by marketing them with a combined asking price of about $5 billion last year.

Mr. Roth, Vornado’s founder and chief executive, came to believe the Trump Organization’s stake in the buildings was a reason for the lack of buyers, say people briefed on the matter. The few investors that could afford that high a price tag—mainly government-linked investment and pension funds—stayed away, and near the end of last year Vornado shelved the process.

Vornado then tried to refinance the buildings and take advantage of rock-bottom interest rates. But lenders were wary of Mr. Trump after the riot at the U.S. Capitol by his supporters and didn’t pursue the business. Mr. Roth, 79 years old, who has established deep relations with major banks over the decades, put the effort on hold.

Vornado and a Canadian pension fund, meanwhile, refinanced a New York City office tower the two firms own jointly with debt from Deutsche Bank AG and Barclays PLC, according to a person familiar with the matter.

Since the Capitol riot, many of Mr. Trump’s partners, clients and allies have refused to do business with his company, including three banks with millions of dollars of his money. Longtime lender Deutsche Bank also wants to distance itself from Mr. Trump, says a person familiar with the matter, and is unlikely to refinance the Trump Organization’s debt.

Vornado has full control over the properties, and if it eventually succeeds in selling them, it could help the Trump Organization raise cash to cover debts. Because office buildings have long-term leases, they have been a source of financial stability for the Trump Organization.


Overall, last year and in the first few weeks of 2021, the minimum revenues generated by Mr. Trump’s businesses fell to $278 million, compared with $446 million in 2019, according to Mr. Trump’s government disclosure forms.

A Wall Street Journal analysis of the Trump Organization’s financial position, based on information from loan-data provider Trepp, Vornado’s securities filings and other sources, shows the critical importance of the partnership.

The buildings are each estimated to generate combined yearly cash flows of more than $20 million for the Trump Organization after expenses and debt service, more than Trump-branded properties such as Trump Tower in New York City and the Trump International Hotel in Washington, D.C. Under the partnership, Vornado decides how much profit to distribute to the owners or reinvest in things like building upgrades, say people familiar with the matter.

The performance of the Vornado buildings has strengthened in recent years as other Trump properties lagged behind. In New York, Trump Tower’s net operating income fell 6% from 2016 to 2019, according to Trepp, while net operating income grew 27% at 1290 Avenue of the Americas.

That building is occupied by large corporate tenants with leases including the investment giant Neuberger Berman Group and real-estate services firm Cushman & Wakefield PLC. Neuberger Berman didn’t respond to a request for comment. Cushman & Wakefield said after the Capitol riot it would no longer do business with the Trump Organization. It says it has no plans to relocate its office from 1290 Avenue of the Americas.

Mr. Trump didn’t set out to buy the New York and San Francisco towers as much as he stumbled into them.

In the 1980s, Mr. Trump acquired a swath of land on Manhattan’s far West Side, with plans for one of the most ambitious projects in New York City history: a more than 15 million-square-foot development of residences, office, retail and television studio space. The centerpiece would have been a 150-story skyscraper.

During the early 1990s, Mr. Trump defaulted on loans tied to the project. A group of Hong Kong investors then threw him a lifeline, agreeing to buy the development. They kept Mr. Trump as a 30% partner, but they insisted his limited partnership blocked him from participating in major decisions, including a sale.

Mr. Trump oversaw construction of several condo and rental residential buildings known as Trump Place, plastering the Trump name in big block letters on the properties. His partners sold the project in 2005 for around $1.8 billion and reinvested the proceeds in the two office buildings. Vornado then bought the Hong Kongers’ stake in the buildings. Mr. Roth also sought to buy Mr. Trump’s share, but Mr. Trump declined.

Vornado, one of New York City’s biggest office landlords, last summer started a process to sell the buildings. The ramifications of such a large deal involving a sitting president were evident to some analysts who follow Vornado. Alexander Goldfarb of Piper, Sandler & Co. questioned Mr. Roth about them in an August analyst call.

“Oh, boy,” Mr. Roth replied. “I pay zero attention to what you call the political risk.” Mr. Roth said Mr. Trump was merely a minority stakeholder and didn’t have any say about whether Vornado would do a deal.

Behind the scenes, potential buyers saw things differently. The steep price tag meant that only a couple dozen investors could be counted as potential buyers. Many were deep-pocketed foreign sovereign-wealth funds who told Vornado to count them out of anything involving Mr. Trump, people familiar with the sale effort said.

Vornado’s share price has fallen by more than 30% since March, as the pandemic and a possible work-from-home future raises concerns about the value of its office buildings.

After the Capitol insurrection, business leaders and banks publicly disavowed doing business with the Trump Organization. Mr. Roth again felt his refinancing efforts would be exempt from political blowback because the buildings were controlled by Vornado and the Trumps were only passive stakeholders. Banks had always understood that.

People who know Mr. Roth said it was sobering for him to learn that perception had changed. His effort to refinance never really got going. For now, these people said, it is on pause while Mr. Roth figures out what to do about the Trump partnership.

FT : German finance ministry lambasts regulator over Wirecard

German finance ministry lambasts regulator over Wirecard
Government issues rare public rebuke of BaFin for 2019 short selling ban

BaFin’s ban on the short selling of Wirecard shares in 2019 was based on poor and insufficient analysis, Germany’s finance ministry said in a rare public rebuke of the country’s top financial watchdog. 

“In hindsight, further analysis and investigations into the validity of the information available to BaFin would have been necessary,” Sarah Ryglewski, parliamentary state secretary at the ministry of finance, wrote in response to a written inquiry by Green MP Danyal Bayaz.

The German payments company last summer collapsed into insolvency in one of Europe’s biggest postwar accounting frauds which continues to send shockwaves through Germany’s financial and political establishment.

BaFin for years did little to investigate whistleblower allegations of misconduct at the company, but instead targeted journalists and short sellers who criticised Wirecard. In 2019 it banned betting against Wirecard’s share price for two months.

Finance minister Olaf Scholz last month pushed out BaFin president Felix Hufeld and his deputy Elisabeth Roegele for their handling of the affair. 

The finance ministry has now taken BaFin to task for failing to offer an adequate justification for the short selling ban. The government argued that the watchdog should have employed statistical tools to assess potential correlations between Wirecard’s share price and other stocks.

BaFin should have also assessed how short selling positions in Wirecard before and after the publication of critical articles changed, the government said. 

“The federal government is of the opinion that the bar for imposing a short selling ban should be high,” Ryglewski wrote, adding that the government would strengthen BaFin’s analytical capabilities as part of an imminent and thoroughgoing overhaul of the watchdog. 

BaFin declined to comment. 

Ryglewski acknowledged that the finance ministry was briefed about BaFin’s plans to impose the short selling ban in advance. However, she pointed out that the government did not interfere with the move as the financial regulator took such decisions independently.

“BaFin enlarged the damage that was inflicted on investors and creditors,” Bayaz told the Financial Times, adding that the BaFin’s move gave a false sense of security to Wirecard investors. “The ministry of finance did not stop it.”

The FT reported last week that BaFin briefed the European Securities and Markets Authority selectively and incompletely about the ban, omitting to mention that the German Bundesbank had found no evidence that Wirecard’s falling share price could spill over to other stocks. 

The central bank concluded that a short selling ban could not be justified on the grounds that it would mitigate risks to financial stability. After Bundesbank staff informally informed BaFin employees about their findings, the watchdog decided against asking the central bank for a formal assessment on the matter.