People walk past an advertisement for Wi-Fi provider Gowex in Madrid. Gowex revealed yesterday its accounts have been falsified for at least four years and said it is filing for bankruptcy protection.
Spanish free Wi-Fi provider Let’s Gowex revealed yesterday its accounts have been falsified for at least four years and said it is filing for bankruptcy protection.
Gowex, which offers Wi-Fi services in world capitals including Paris and New York, made the devastating admission after days of protesting that a damaging US report on its operations was incorrect and defamatory.
Gowex president Jenaro Garcia Martin informed his board the previous day that, in fact, he had faked the company’s results, the firm said in a statement released by Madrid’s Alternative Equity Market.
“Garcia Martin, chief executive and president, said before several board members that the company accounts for at least the last four years do not reflect the true picture, attributing this falsehood to himself,” Gowex said.
Board members revoked the chief executive’s powers and accepted his resignation, it said. “The board, confronted by the expectation that the company would not be able to cope with its maturing current debt payments, agreed to file a voluntary request for bankruptcy.”
Gowex had been expected to give a detailed response to allegations about its operations, which had sent its shares plunging 60.2% to €7.92 in two days before they were suspended from trade by Madrid’s junior stock market, the Alternative Equity Market.
US firm Gotham City Research sparked the freefall Tuesday by publishing a highly critical report, which had previously been described by Gowex as “unfounded and defamatory”. Gotham City Research called Gowex a “charade” and said its revenues were far lower than the company had reported. Gotham City said its target price for Gowex shares was zero. In its 93-page report, Gotham City said Gowex’s actual revenues were “at most” 10% of those reported.
About 90% of Gowex’s telecommunications revenues came from undisclosed related parties, Gotham City said. Gowex’s audit fee was only €40,000, far less than would be expected for a company generating revenues of more than €180mn, the firm said.
“We have evidence Gowex’s largest customer was really itself,” the report said. The European professional investors association ASINVER reportedly filed suit Friday against Gowex with the Spanish public prosecutor alleging false accounting.
Spanish stock market regulators are also likely to face scrutiny over their supervision of the firm’s activities.
On Wednesday, the Spanish market regulator, the CNMV, said it had asked the US Securities and Exchange Commission and Britain’s Financial Conduct Authority “for information about Gotham City Research and its administrators”.
The CNMV said it did so “in order to analyse whether the document published by that entity on Let’s Gowex could constitute a possible abuse of the market”.
On the same day, Gowex had issued a statement confirming its 2013 revenues of €182.6mn ($249mn) and stressing that the figures had been audited.
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