The founder and CEO of Gowex has quit today after admitting his company accounts are made up and he’s been hiding the loss of hundreds of millions of euros.
Trading in Gowex shares was suspended on Thursday after they dropped by about 60 percent in two days, wiping around 870 million euros ($1.2 billion) off the company’s stock market value, in the wake of a damning report by US short sellers Gotham City Research.
Gotham said that the company was essentially worthless, with 90% of its sales being fake, and instead of over 30,000 WiFi hotspots across the nation, the company only had about 5,500.
“Mr Garcia Martin, Chief Executive Officer and Chairman, has told several board members that the accounts of the company, for at least the last four years, were unfaithful and that he was responsible for this misrepresentation. The board … has accepted his resignation,” Gowex said in a statement published on Spain’s MAB stock exchange.
The company also admitted today it will file for bankruptcy on Monday as it doesn’t have any cash. Their website has been abruptly taken down.
It’s been reported that Let’s Gowex SA had absolutely no external auditing, and it’s accounting costs for last year were a miserable 56,000€, paid to a local Madrid accountant. Quite how this chap was supposed to audit almost 200 million euros of sales in a public company was unclear. Gowex’s closest rival spent 1,4 million euros last year on auditing 114 million euros of sales, which was a more reasonable cost, suggest industry experts.
It seems to have been a massive boiler room front, in my opinion. Let’s Gowex, S.A. was also listed on tech stock markets in New York and Paris. Garcia Martin was obviously playing the markets, with his mate signing off on the accounts.
Garcia Martin could not immediately be reached for comment. A brief posting on his Twitter account on Sunday read: “I apologise to all. I am heartily sorry.”
Pido perdón a todos. Lo siento de todo corazón.
— Jenaro Garcia (@jero_net) July 6, 2014
Furious investors weren’t accepting the apology, however. Or as one angry reply on twitter read, “Hang on, aren’t you supposed to be in jail?”
No news yet on any legal investigation, although a complaint has been filed with the Spanish prosecutor general by an investor.