Gowex shares plunge on allegations of inflated revenue

Just a day after I posted an article questioning the spectacular rise in the share price of Gowex, its shares plunged as much as 58 percent today after Gotham City Research LLC released a detailed report on the company, stating that over 90 percent of Gowex’s reported revenues are a fantasy. In fact, Gotham City Research set a price target of € 0.00/share (100% downside)!

Here is a chart of Gowex’s share price showing the plunge from June 30 to July 1, 2014.

Gowex shares plunge on 1 July 2014

Below is an excerpt about Gowex from Gotham City Research’s website and a link to the full research report on Scribd.

SUMMARY OF OPINIONS

• Gowex shares are worth €0.00 per share.
• Over 90% of Gowex’s reported revenues do not exist. We estimate GOW’s actual revenues to be <€10 million.
• The shares will be suspended, just as Pescanova’s shares were suspended.

SUMMARY OF FINDINGS

• Gowex’s actual Wireless revenues are at most 10% of what GOW reports in its financial statements.
• GOW’s Hotspot network it owns or manages is ~5K in size. CEO told us 100K+ & JBCapitalMarkets estimates 35K.
• GOW’s audit fee is €40,000, which makes sense if Gowex’s actual revenues are only 5%-10% of reported revenue.
• 90% of Telecom revenue originated from undisclosed related parties, tied to GOW CFO & an early investor. We have evidence Gowex’s largest customer was really itself.
• Gowex Telecom (i.e. Iber-x) website has not been updated in years. It appears to be no longer in business.
• Gowex told some investors that New York City was paying them €7.5 million. GOW told us €2 million. The real number is <€200,000, according to New York City.
• Gowex does not publicly disclose basic metrics, such as hotspot count or wireless revenue segment details.
• The head of investor relations is the CEO’s wife. She signed off on GOW’s annual reports.
• The June 5th MallPlaza press release (in English) makes demonstrably false claims. The same press release in the native Spanish omits the false claims.
• GOW lied to the European Union’s Transparency Register, claiming it spent over €50 mm in political contributions.
• CEO Jenaro Garcia was a Director of Advanced Refractive Technologies, a penny stock fraud whose shares were revoked by the US Securities and Exchange Commission.
• GOW’s private market valuation is only €0.14 per share, based on Arqiva’s acquisition valuation.

LINK: Gotham City Research report on Gowex (Scribd)