Gotham City Research, the short-seller that led a bear raid on Quindell, has now set its sights on Spanish telecoms group Let’s Gowex, claiming that ‘over 90% of its reported revenues do not exist’.
In a note published yesterday, Gotham predicted Gowex’s shares will be suspended and issued a target price of €0.00.
Its 93-page research note on Gowex had a similar impact, pushing the wifi operator’s stock down by 44% in mid-afternoon trading. Gotham has accused the company of overstating both its sales and the size of its operation, alleging Gowex failed to disclose that it is effectively its own biggest customer.
‘After eight months of diligence, we found Gowex is a lot worse than we initially thought. GOW is a zero,’ Gotham wrote.
‘We specifically noticed three clear patterns. Firstly, GOW has a proven track record of making demonstrably false claims. Second, Gowex provides different answers, to different investors. Third, wireless industry experts are unable to make sense of GOW.
‘We are confident GOW is a charade and [its] shares are worthless.’
Gotham said 90% of Gowex’s revenues came from undisclosed parties, which it alleges are tied to its chief financial officer and an early investor. It also claims that Gowex manages or owns 5% of the number it claims to and said if its revenue per employee were as reported, it would be ‘far above nearly all other business in history’, including the likes of Facebook, Microsoft and Google.
Gotham also queried the chief executive’s wife, who is head of investor relations, signing off the company’s 2013 annual report, and why it uses an ‘unknown’ auditor and only pays a fraction of the costs of its peers for auditing.