- Financial services provider Grenke is being investigated by BaFin, the German financial regulator.
- The investigation comes after a report by a short-selling investor research company alleged it of market manipulation, money laundering and fraud.
- Shares of Grenke were down 29% at one point on Tuesday.
LONDON – Grenke, a German financial services company, is under investigation after a report by a short-selling investor research company alleged it of market manipulation, money laundering and fraud.
The 64-page report, which Grenke strongly rejects, was published by Fraser Perring of Viceroy Research. Shares of Grenke, which is listed on the Frankfurt Stock Exchange, were down 29% at one point on Tuesday and saw heavy falls again on Wednesday.
Grenke argues that one of the main accusations in the report is false.
"A central accusation is that a substantial portion of the 1,078 million euros in cash and cash equivalents reported in the 2020 half-year financial report does not exist," Grenke said in a statement. "This is demonstrably false."
The company said 849 million euros was held in Deutsche Bundesbank accounts on June 30. "As of today, the credit balance at the Bundesbank amounts to 761 million euros," Grenke said. A spokesperson for the German central bank declined to comment when contacted by CNBC.
Grenke said it is currently preparing a detailed reply to the accusations and that it reserves the right to take legal action.
BaFin, the German financial regulator, told CNBC it was looking into the allegations of market abuse. The regulator said its probe will look to establish whether Grenke tried to manipulate markets by, for example, giving false information regarding financial statements.
It will also look to determine whether there was potential market manipulation by third parties who may have initiated a short attack.
BaFin said it was also reviewing possible insider trading at Grenke before Viceroy's report was published online.
Founded by Wolfgang Grenke in 1978, Grenke employs 1,700 employees across 32 locations worldwide. The company, headquartered in the spa town of Baden-Baden in southwestern Germany's Black Forest, mainly provides banking services to small and medium-sized firms.
Viceroy Research raised the alarm on German electronic-transfer company Wirecard in 2016 with the now famous "Zatarra Report."
Founded in 2016, Viceroy Research rose to fame in 2017 after it published a report on accounting irregularities at South African retail giant Steinhoff that led to a share collapse.
In November 2018, South Africa's central bank governor claimed that Viceroy Research had profited "unethically" from its reports, according to Bloomberg. The company's "About" section on its website doesn't give much away, describing the firm as "a group of individuals that see the world differently."