July 3 (Bloomberg) -- Let’s Gowex SA trading was suspended in Madrid as Spain’s regulator investigates potential “market abuse” after a report by Gotham City Research LLC wiped about 870 million euros ($1.2 billion) off the company’s market value.
Today’s suspension came after the regulator said in a statement last night that it asked the U.S. Securities and Exchange Commission and the U.K.’s Financial Conduct Authority to provide information on short-seller Gotham City and its managers. The regulator is also investigating trading in Gowex shares in recent days to “determine if there have been illegal operations,” according to the statement.
Gowex announced yesterday that it will seek tenders to hire “a prestigious” auditor after Gotham City published a report on July 1 criticizing its use of an “unknown” auditor. The Gotham report also claimed that Gowex’s real value is “zero,” that some of the company’s units have revenues that are 10 percent of that reported and that Gowex declares clients it doesn’t have. Gowex has said the report is “false.”
Gowex shares fell 60 percent in two days after the report to 7.92 euros yesterday in Madrid. Trading is suspended until Gowex responds to a request “to present a plan, as detailed as possible, with the actions it considers necessary regarding the Gotham City Research LLC report,” specifying the reach and duration of each action, the regulator said in a statement today.
Gowex, which provides Wi-Fi connections as well as support services for mobile-phone carriers, also trades on New York OTC and NYSE Euronext Paris markets.
Gotham doesn’t identify its managers or stakeholders on its website. Gotham “stands to profit in the event the issuer’s stock declines,” it said in its report on Gowex.
Gotham has published reports on four other companies on its website, dating back to February 2013: Ebix Inc., The Tile Shop Holdings Inc., Blucora Inc, and Quindell Plc. While all four are down at least 20 percent through yesterday from the time when the reports on them were published, they are all trading above the target prices suggested by Gotham.
To contact the reporter on this story: Rodrigo Orihuela in Madrid at firstname.lastname@example.org
To contact the editors responsible for this story: Kenneth Wong at email@example.com Robert Valpuesta, Mark Beech