After Delivery Hero SE (Delivery Hero) published its latest quarterly figures in February 2022, the share price plummeted: Delivery Hero shares (ISIN: DE000A2E4K43) meanwhile plunged by around 40% due to the unexpectedly poor quarterly figures. Around 5 billion euros in stock market value were destroyed in the meantime. However, many of the figures were quite respectable: Delivery Hero’s revenues increased significantly. Yet, it was not the growth in sales that was decisive for the market, but another key figure: net income deviated significantly from expectations. The loss before interest, taxes, depreciation and amortization (Ebitda) adjusted for special effects rose by almost a third to 781 million euros. The share price plummeted because of this unexpected result. What Delivery Hero delivered was not what the market had in mind.

Against this background, some German media are already comparing the events at Delivery Hero with the Wirecard case. However, such a comparison is misplaced: The only similarity to Wirecard is that the share prices have swung considerably both here and there after the public disclosure of information that was obviously extraordinary relevant to the share price, and they have both done so in a downward direction. In the case of Wirecard, however, balance sheets were manipulated over many years and with a high degree of criminal energy. This is not the case with Delivery Hero. The company only published quarterly figures that were negatively received by market participants due to a more positive market expectation. By publishing its quarterly figures, Delivery Hero has fulfilled its obligations. Or maybe not after all? Let‘s get to the bottom of this question.

The German Federal Financial Supervisory Authority (BaFin) has issued a statement on the plunge in Delivery Hero’s share price. It said it was examining whether Delivery Hero had fulfilled its transparency obligations. This is an examination that routinely takes place in the case of such an unusual trading event, a BaFin spokesperson added. So what exactly is BaFin examining in this matter?

First of all, it should be noted which obligations issuers have in concrete terms: Listed issuers such as Delivery Hero are obliged to inform the market comprehensively, in two respects, namely within the framework of regular disclosure obligations on the one hand and within the framework of ad-hoc disclosure obligations on the other. These obligations are not mutually exclusive, but complement each other.

On the one hand, the issuer must therefore regularly inform the market of specific information and key figures in the form of annual financial reports and half-yearly financial reports. Since these pieces of information are to be communicated regularly, but thus only at certain times, issuers must also inform the market about so-called inside information on an irregular basis in order to create immediate transparency in certain cases. Inside information is information of a precise nature that has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were to be made public, would be likely to have a significant effect on the price of those financial instruments or on the price of related derivative financial instruments. Such inside information must be disclosed as soon as possible, i.e. without delay, and entirely independently of the issuer’s regular disclosure obligations.

In the Delivery Hero case, BaFin does not examine whether regular disclosure obligations have been violated: It is true that, as explained at the beginning, Delivery Hero is obliged to publish half-yearly and annual financial reports on a regular basis. However, the announcement published by Delivery Hero, which was followed by the share price drop, is a quarterly announcement. Delivery Hero was not obliged to publish it under the German Securities Trading Act (WpHG). Delivery Hero was indeed obliged to publish this announcement, but only in accordance with the stock exchange regulations of the Frankfurt Stock Exchange. BaFin, however, does not investigate violations of the stock exchange regulations.

From BaFin’s point of view a violation of the ad hoc disclosure obligation cannot be ruled out, and with good reason: The quarterly announcement issued by Delivery Hero was obviously relevant to the share price to a very significant extent. This is impressively demonstrated by the share price reaction following the publication of the quarterly announcement. In the event of a violation, ie an intentional or reckless breach of duty, fines of up to two percent of total sales in the previous fiscal year can be imposed on Delivery Hero.

A significant change in key financial figures can constitute suitable inside information pursuant to Article 7 (1) of the Market Abuse Regulation (MAR). As things stand, we are also firmly convinced that Delivery Hero’s poor net result – which was completely unexpected at this level – constitutes inside information. In this respect, it should also have been published as an “ad hoc announcement” and as soon as possible. This did not happen.

However, it is too early to assess whether Delivery Hero shareholders are actually entitled to claim damages. Under certain circumstances, an issuer is permitted to delay the disclosure of inside information. It remains to be seen whether these conditions existed in the case of Delivery Hero. We consider legal action at this point in time to be very risky. It would clearly be premature to file a claim.

Moreover, in the event of an assumed breach of the ad hoc disclosure obligation, not all shareholders would be entitled to damages, but only a small group: In the event of an assumed breach, only those shareholders would be entitled to damages who traded in Delivery Hero shares during the so-called disinformation period. This refers to the period between the emergence of the disclosure obligation and the public disclosure of the inside information in question.

Example:
If the duty to publish insider information arises on January 10, 2022, and this information becomes public knowledge one month later, on February 10, 2022, in principle only those shareholders have a claim for damages under Section 97 of the German Securities Trading Act (WpHG) who acquired shares in the issuer within this period and only if they also held these shares until the inside information became public knowledge.

Details matter. This is specifically true with regard to capital markets law, disclosure obligations and potential claims. At this time, investors are well advised not to take legal action We will be happy to keep investors up to date in this matter.