Morning of Wednesday 21 October: we talk to Costis Papadimitrakopoulos about Globo’s apparent lack of customers, and allegations the company has fabricated sales. The Globo CEO and founder denies any wrongdoing. He puts us in touch with longstanding business associate Thanos Giamas, founder and CEO of Metis SA, to vouch for Globo. Following that conversation, according to Monday’s statement: The Chief Executive Officer, Mr Konstantinos Papadimitrakopoulos advised the Company on 25 October 2015 that up to 22 October 2015 he has: • sold 42,049,655 shares of Globo Plc; and • pledged 10,000,000 shares of Globo Plc under a personal loan agreement with Lantau Holdings Limited. The loan will default at close of business today because of two consecutive days of the suspension of the Company’s shares from trading.
Globo plc is a small technology company founded by a champion windsurfer in Greece 18 years ago and listed on Aim, London’s junior market, by reverse takeover in 2007. Since then it has raised more than €100m from sales of its stock and debt. It has some legacy businesses, and has made acquisitions, but its biggest business is now Go!Enterprise, software designed to create a secure bit of space for your employer’s data on your personal phone. However, according to a critical report published by Quintessential Capital Management, a small New York Hedge Fund run by Gabriele Grego, there appear to be problems with reported sales and profits. QCM tried to register an interest to buy the product with 40 different partners, resellers and distributors listed by Globo, without success. Globo “completely refutes all allegations made in this report”, and has requested a suspension to its stock so it can provide a more detailed response. In the meantime, the question for investors and auditor Grant Thornton is who really buys Globo’s product?
A trading update lands from Plus500, the Israeli contract for difference group. Let us draw your attention to a paragraph on its regulatory troubles, which resulted in the freezing of all UK accounts earlier this year. The Group continues to be the subject of regulatory scrutiny. However, throughout the period Plus500 has continued to work with, and provide any requested information to, the relevant regulators in the jurisdictions that it operates in but is currently not the subject of any restrictions on its business operations. No restrictions? This might surprise customers trying to sign up in the UK on Monday, who are told “Plus500UK Limited is currently unable to offer you a trading account.”
Slater & Gordon, the Australian legal group, delivered a fully audited set of results on Wednesday, the deadline to do so. Shares in the company — which have collapsed since it swallowed almost all of UK corporate train wreck Quindell — barely budged on the day, closing up 2 per cent. So what happened? We suspect the lack of market enthusiasm is related to how many of the numbers reported in August were different to those on which the auditors signed off this week. We’ll pick out a few below (and offer a quick reminder of why this all matters), but here is what may be the most important: somehow A$12.5m of underlying revenues and A$8.5m of underlying net profit fell out of the accounts in the last month.
A brief reminder of the Australian listing rules: companies must deliver an audited set of results within three months of their financial year end. For Slater & Gordon, the Australian listed law group digesting most of UK peer Quindell, that means Wednesday September 30, lest the shares be suspended come Thursday. We’ve mentioned before some of the issues likely to be discussed by the company and its auditors, in particular balance sheet values for accumulated work in progress and whether any of the A$1.1bn paid for Quindell in May should be written off. Lets think through the scenarios.
Forward guidance under Ben Bernanke and then Janet Yellen has been… changeable, notes David Kelly, chief strategist for JP Morgan Asset Management, who shares a reminder of the shifting timescale. Here’s the Federal Reserve on when it would be appropriate to raise the target range for the federal funds rate: January 2009 — not “for some time” March 2009 — not “for an extended period”
The biggest shopping event in the world? That would be “Singles Day”, an anti-Valentines festival of Chinese spending dominated by Alibaba, Jack Ma’s giant e-commerce company which also has a set of Cayman registered derivative contracts listed in New York under the same name. When Bronte Capital hedge fund manager John Hempton recently interviewed job candidates, he asked them to think through the implications of a company making 278m online transactions in one day. He has now blogged about it, which is worth reading for two reasons: as an example of the way investors think through their assumptions and information provided by a company and, perhaps more importantly, for the critique of numbers supporting a $157bn valuation of those New York listed derivatives.
If you’re thinking about stock fraud, you don’t want to do it in the US where the SEC has both prosecutorial power and a desire to exercise it. One other point to consider from the SEC’s latest prosecution: it is possible to pursue individual auditors for missing signs of fraud they should have caught, without destroying the audit firm in a repeat of the Arthur Andersen collapse. Washington D.C., Sept. 9, 2015 — The Securities and Exchange Commission today charged national audit firm BDO USA with dismissing red flags and issuing false and misleading unqualified audit opinions about the financial statements of staffing services company General Employment Enterprises.
Slater & Gordon, the Australian listed law group, on Friday released a complex set of accounts full of restatements, unusual accounting policies and changes to the way the figures are prepared and presented. The company under investigation by the Australian Securities and Investment Commission, but these are preliminary figures — and so not audited yet. Andrew Grech, managing director, signed a statement saying “The financial report is in the process of being audited and is not likely to be subject to audit dispute or qualification.” The accounting firm doing the work has not been named. Slater & Gordon recently purchased almost all of the scandal hit UK group Quindell for A$1.3bn. More details from the results below, but first some highlights: the Australian group has significantly more debt than expected, the numbers don’t match the pro forma set presented at the time of the acquisition, and in a month of operation the businesses acquired managed to lose A$5m.
Slater & Gordon, the Australian listed law group, will report full year results on Friday, the first since buying almost all of the UK listed basket case Quindell for A$1.2bn. Presentation of the figures had been set for the 24th, but was pushed back four days. The reason, Slater & Gordon told us, was “to provide our shareholders with the fullest update possible on our FY15 results and our FY16 outlook”. One risk here is that a full update will include the admission it bought a billion dollar basket case. We’ll consider that and other issues below, in search of an answer to the underlying question: why did Slater & Gordon get suckered by Quindell?
Wirecard, the German listed payments company, is what might be called a tug of war stock. On the one side are fans, who have long liked fast growth in sales and earnings and expect it to continue. On the other are critics and potential sellers, concerned about what appears to be an unexplained pile of assets on the company’s books. If there isn’t a good explanation for that pile, the risk is sales and profits — the basis for enthusiasm — were overstated. On Tuesday Wirecard will have the opportunity to resolve that debate when it publishes results, by doing what any company should be able to: explain its business in clear and simple terms.
Mr. Elon Musk, our Chief Executive Officer, Product Architect and Chairman of our Board of Directors, has indicated his preliminary interest in purchasing up to an aggregate of 83,974 shares of our common stock in this offering at the public offering price for an aggregate purchase price of approximately $20 million. Tesla Motors, the loss making manufacturer of electric cars, has announced plans to sell an additional 2.1m shares to its investors, to raise $0.5bn in cash.
Hoisted from the archives, a Nokia presentation from the Lehman Brothers Worldwide Wireless and Wireline Conference, May 29 2008. We were prompted to find it by a stock photo of the Economist (now sold). The February 2005 edition included the headline story “Nokia’s turnaround”, about what was then the world’s largest maker of handsets. Ho ho, we thought, until we looked at the share price.
Google has discovered the conglomerate, and segment reporting. The search business, and all the other businesses such as driverless cars and eternal youth, will be subsidiaries of Alphabet Inc. Larry Page and Sergey Brin will run the centre and allocate capital. Here is a non-exhaustive and speculative list of reasons why they might be doing it:
Can China, which has announced 24 separate policy measures since the start of July, save its stock markets through intervention? To help think about ways to answer the question, Nikolaos Panigirtzoglou and team at JP Morgan have looked at two previous interventions by the authorities in Japan and Hong Kong. Perhaps unsurprising, it depends.
Materiality is the rock upon which public corporate information rests. If something happens at a company which is material, out it goes into public view, either in the regular accounts or, if price sensitive and pertinent, in an ad hoc statement to the market. Rock may be too solid a term, however, for something which is a matter of opinion. As a case in point, consider a recent announcement from Slater & Gordon, the Australian listed law group, of something immaterial. S&G, having recently acquired almost all of the operations of Quindell, a mess of UK legal and insurance related business, said last week that a large UK insurer would end a longstanding commercial agreement with the business. The customer loss is “not expected to be material to FY16 earnings, but Slater and Gordon has elected in the current circumstances, to make this announcement nevertheless.”
Quindell was once a Hampshire country club. Robert Terry took it and built a business that, to begin with at least, had something to do with technology and insurance. It bought and sold companies from and to Mr Terry and his associates. At one point his wife signed off on the accounts as finance director. In 2011 it listed on Aim, London’s junior market, then went on a buying spree, exchanging shares promoted to small investors for a bewildering array of companies involved in law, loft conversion, insurance, garages, physiotherapy and technology. Quindell raised £200m from investors, and spent some of the cash on companies run by longtime associates of Mr Terry. By 2014 it was the largest company on Aim, worth almost £3bn. Mr Terry promised his company would produce cash, but it never did. He sold some of his stock in controversial circumstances, left the company while pocketing £1.5m severance, then sold the rest. It has taken the new management seven months to sort out the accounts. On Wednesday they published extensive restatements to past numbers, as staggering in their scale as they are for the careful politeness of the changes to accounting policy described. Following publication, the Serious Fraud Office announced a criminal investigation.
Earlier this year Slater & Gordon, the Australian-listed legal group, paid £637m (A$1.2bn) in cash for the Professional Services Division of Quindell, a large UK law firm tied to a motley array of businesses. Slater & Gordon raised A$890m from stockholders to do so, and has about A$550m of debt. The deal was conducted in a hurry, while PWC was reviewing Quindell’s past accounts, but Slater & Gordon said its due diligence was extensive and the underlying business of PSD was profitable. On Wednesday Quindell published a brief set of figures, audited by KPMG, for the business it has just sold. According to those numbers, PSD lost £194m (A$411m) in 2013 and 2014. Operating cash flow was also negative in both years, a drain of £144m. Tangible net assets for the division are negative. The Serious Fraud Office is also investigating past accounting and business practices at Quindell.
The Serious Fraud Office appears to have noticed the large restatements by Quindell, and got in touch. From the announcement: Quindell Plc (AIM: QPP.L) announces that this afternoon, the Serious Fraud Office informed the Company that it had opened an investigation, which the Company understands relates to past business and accounting practices at the Company. The Company will continue to cooperate with all relevant regulatory and law enforcement authorities.
Quindell has published accounts for 2014. Shares in the rump of business left behind after almost all of the legal, insurance, telecoms, garage and solar panel conglomerate was sold to an Australian legal group have been suspended for over a month due to a failure to deliver financial statements. There is a lot to read, and a media call at 12.15. Updates/further posts to follow. In the meantime…
Below is security camera footage of a targeted attack which took place in West London in June 2014. There is a reward for information leading to a successful prosecution. The victim was Michael Memarian, a London-based architectural consultant. Mr Memarian is also one of the subjects of a series of defamatory and untrue malicious blogs targeting people involved with Global Iron Ore, a commodity trading firm at the heart of a controversy surrounding large payments made by African Minerals in 2012, the failed Sierra Leone mining company previously listed in London and controlled by Frank Timis. Police investigations into both the assault and the blogs are ongoing. They are yet another twist in the strange tale of a Sierra Leone iron ore mine once listed in London and worth billions of pounds, but now placed in administration as creditors fight over the future of one of the West African country’s most valuable resources.