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Fund managers hit by scandal engulfing AIM tech firm

Fund managers hit by scandal engulfing AIM tech firm

Fund managers have been hit by the scandal engulfing Alternative Investment Market stock Globo (GBOG), after the bosses of the company resigned and its shares were suspended following allegations of fraud.

A number of smaller company and growth managers hold the app developer, which yesterday was hit by the resignation of its chief executive and chief financial officer (CFO), in the fallout from a report last week claiming the company had overstated its revenues and profits by up to 60%.

Hedge fund manager Quintessential Capital, which published the report, alleged the company had generated fictitious sales invoices from a string of shell companies it controlled.

New York-based Quintessential, which has a short position on the shares, also alleged that the company had deceived investors and creditors over the customers it claimed to have.

On Friday Globo issued a statement denying all the allegations made in the report but said it had requested for trading in its shares to be suspended while it prepared a more detailed response.

Yesterday, following an emergency board meeting on Saturday, the company announced that chief executive Costis Papadimitrakopoulos and Dimitris Gryparis had resigned with immediate effect.

Those holding small positions in the stock include Victoria Stewart, manager of the £200 million Royal London UK Smaller Companies fund, Citywire AA-rated Bradley Mitchell, who manages the Royal London UK Growth fund, and Citywire A-rated Ivor Pether, manager of the Royal London UK Equity fund.

Citywire AA-rated Michael Barakos and AAA-rated Ian Butler, managers of the JPMorgan Europe Strategic Value fund, also hold the stock, alongside the Standard Life Investments UK Opportunities fund.

Legal & General also holds the stock, with Thomson Reuters data showing Legal & General UK Alpha, run by Richard Penny, and Legal & General UK Smaller Companies, run by Citywire A-rated Rod Oscroft, as shareholders.

It pointed out in a statement that since first buying the stock, it had returned 134% for its funds. Penny bought the stock at 15p in February 2011, around half the 29.5p price at which the shares were suspended on Friday.

The holdings do not represent major positions, with none of the funds holding more than 1.2% of the company, which has a market capitalisation of £106 million, according to Thomson Reuters data. 

Nimmo's escape

Harry Nimmo (pictured), manager of the Standard Life Investments UK Smaller Companies fund, sold his holding in Globo earlier this year, having ranked as the company's second biggest fund shareholder in July, behind the Norwegian government pension fund, according to Thomson Reuters.

In a statement the company said Papadimitrakopoulos had ‘brought to the attention of the board certain matters regarding the falsification of data and the misrepresentation of the company’s financial situation, and offered his resignation, as did Dimitris Gryparis the CFO of the group.’

Chief operating officer Gerasimos (Makis) Bonanos has also been suspended, the company said, adding that all its executive directors would fully co-operate with any investigations.

It also revealed that Papadimitrakopoulos had informed the board that by 22 October he had reduced his stake to 7.5% or 27.7 million shares. He had previously held 18.7% or 69.7 million. Of his current stake, 10 million shares had been pledged as collateral for a personal loan that was about to default because of the suspension of trading in the stock.

In a separate announcement yesterday, Globo said Canaccord Genuity had resigned as its joint corporate broker, leaving RBC Capital Markets as its 'nomad' or nominated adviser.

Before Quintessential’s report was published Globo postponed a planned issue of high yield ‘junk’ bonds with which it was trying to raise money. Prior to their suspension the shares had fallen 41% in the past three months.

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Ivor Pether
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98/154 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 25.79%
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