By Paul J. Davies 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 25, 2019).

German payments company Wirecard received a $1 billion investment pledge from Japanese technology giant SoftBank Group Inc., a vote of confidence in a company struggling to get past accounting issues in its Asian arm and investor skepticism of its financial reporting and business model.

SoftBank plans to invest EUR900 million ($1 billion) in a five-year convertible bond. The Japanese conglomerate has an option to turn that into Wirecard shares at about EUR130.00, which would give it a stake of 5.6% in one of Europe's most valuable financial-technology companies.

Wirecard's stock leapt nearly 10% to EUR135.95 on Wednesday following the news, but that is still nearly 20% below its recent peak in January when reports emerged about an investigation into accounting issues in the company's Asian operation which led to a police probe in Singapore. Wirecard has said an internal investigation has found no conclusive proof of fraud or corruption and the issues identified would have only a minimal effect on its financial results, due Thursday.

Wirecard processes electronic payments for retailers, especially online, and provides related services and loans. Its meteoric growth and strong share price appreciation sent its market value above Germany's two biggest banks last year.

The rapid growth, a string of complex acquisitions and limited financial disclosure, have also made it a target for short sellers, who borrow a company's stock and sell it, hoping to buy it back for less in the future.

The SoftBank investment comes just as a ban against taking out new short positions in Wirecard's stock was lifted by German authorities. The country's chief financial regulator, known as BaFin, imposed the ban in February. It was the first time the institution had restricted short selling on a single stock.

The proposed investment from SoftBank, which has to be approved by Wirecard shareholders in June, fits with the Japanese conglomerate's wider interest in digital financial services. It has bought stakes in payments companies such as Kabbage and disruptive insurance companies such as ZhongAn in China and Lemonade in the U.S.

Alongside the proposed investment, which will be made by an unnamed SoftBank subsidiary, the two companies also have signed a memorandum of understanding for a partnership in digital-payment solutions that will help Wirecard extend its reach in Asia. The partnership will include exploration of product and service offers in digital lending, Wirecard said.

SoftBank declined to comment on how long discussions had taken or which part of the conglomerate, or its $100 billion Vision Fund, would ultimately own the Wirecard investment.

"We are excited to partner with the company and see huge potential to deploy this technology at scale across new markets and sectors within SoftBank's global technology portfolio," SoftBank said.

SoftBank's proposed investment in Wirecard is likely only to be converted into stock if the German group emerges from its accounting issues unscathed and the shares go on to perform well, according to a person with knowledge of the deal.

The companies didn't disclose what the bond might pay in interest costs, or coupon.

One investor with a short position in Wirecard said the SoftBank investment wouldn't change her concerns over the German group's business in the near term.

"Institutional investors want audited financials and questions answered about the business model, acquisition accounting and revenue recognition, " said Fahmi Quadir of Safkhet Capital, an investor with bets against the company. "Unless Softbank's stake results in real operational change at Wirecard, I'm not sure if it will be a catalyst for money to come back."

Other prominent short sellers include New York-based Slate Path Capital and Odey Asset Management of the U.K.

Skeptical investors have maintained their bets against the company through the short selling ban and nearly 12% of Wirecard stock is held in short positions, according to S3 Partners, a research firm. Up to the end of Tuesday, short sellers had made mark-to-market gains of $67.1 million collectively from price declines in 2019, according to S3, with $17.2 million of those profits coming after the short sale ban came into effect.

Sarah Sloat contributed to this article.

Write to Paul J. Davies at paul.davies@wsj.com

(END) Dow Jones Newswires

April 25, 2019 02:47 ET (06:47 GMT)

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