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L&G writes off stake in scandal-hit Globo

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L&G writes off stake in scandal-hit Globo

Legal & General UK Alpha manager Richard Penny has written off his stake in scandal-hit Globo (GBOG), labelling the accusations levelled at the app developer 'the worst I have seen in 10 years'.

Penny has a stake worth around £2 million in the Alternative Investment Market-listed company at the 29.5p price at which shares were suspended on Thursday. Globo was last week accused of generating fictitious sales in a report by hedge fund Quintessential Capital, which is shorting the shares.

Globo denied the allegations and requested for trading in its shares to be suspended while it prepared a more detailed response. But on Monday, its chief executive and chief financial officer resigned, and today the company has announced it is under investigation by the Financial Conduct Authority.

Penny said he did not expect to receive back any of his £2 million stake, fearing the company would be placed into liquidation, with potential lawsuits possibly eating up any remaining cash.

He said that 'with hindsight' it was the wrong investment to make, but that it was difficult to account for the potential for fraud in investment decisions.

'You can't legislate for that,' he said. 'If you base your decisions on audited numbers and they are wrong, you can't do it,' he said. 'It's quite exceptional. These sorts of things - we only see anything vaguely like that every five years.'

Penny invested around £5.3 million in the company at 15p per share in February 2011. With the shares having rallied to a peak of 83.4p in October 2013, Penny has banked around £12.4 million since first investing, leaving him with a profit of around £7 million despite the write-off.

'Sometimes you buy something that you shouldn't have and make money out of it,' he said.

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