As the FT reporters who kept the pressure on Wirecard in the face of legal threats, covert hacks, aggressive surveillance and other intimidation tactics (Germany's financial regulator BaFin even launched an investigation into FT reporter Dan McCrum over allegations that he was "collaborating" with short sellers) pop the bubbly in celebration, a handful of prescient short-sellers who remained steadfast in the face of the company's aggressive defense are reaping tremendous profits.
The investing community is still trying to parse how the blatant fraud at Wirecard managed to escape their notice even in the face of intense scrutiny, both WSJ and the FT have published stories about the winners and losers on the buyside.
As we noted earlier today, the investors who made the 'real killing' on Wirecard's collapse are those who bought the insurance against its bonds. Shortsellers who bet directly against the stock, or loaded up on put options, still saw their gains capped (for shortsellers who are borrowing and selling the shares, their max return without leverage is 100% - borrowing costs). Holders of Wirecard CDS saw the spread blow out from just over 500bps (or 18 points up) two weeks ago to 8600bps, or roughly 73 points upfront, at the end of the week.
While we imagine at least some savvy retail traders also made a decent profit off any bets against Wirecard, the success of the CDS trade means mostly institutions probably benefited, and it even begs the question of whether more funds might start focusing on CDS spreads instead of trading equities during the coming months.
Still, WSJ...