July 10 (Bloomberg) -- Let’s Gowex SA, the Spanish Wi-Fi hotspot provider embroiled in an accounting scandal, told a Madrid commercial court that it has started talks with creditors as part of its insolvency procedure.
Maria Dolores Perez Gordo, a lawyer who represents Gowex, said the Madrid-based company is in “situation or state of imminent insolvency,” according to a filing posted on Expansion newspaper’s website. A court spokesman confirmed the statement when reached by Bloomberg News. A Gowex representative declined to comment.
Gowex’s board on July 5 accepted founder and Chief Executive Officer Jenaro Garcia’s resignation after he took full responsibility for falsified accounts for at least the past four years. The shares have dropped 60 percent since July 1, when short-seller Gotham City Research LLC said the company was worthless because it inflated revenue.
Gowex’s fast growth -- a sevenfold increase in revenue over three years and a 10-times surge in its stock in 15 months -- is an anomaly in Spain, which has failed to foster successful technology startups with global reach. The company was one of the best performers in Madrid’s MAB stock exchange, an alternative funding source for small companies promoted by Prime Minister Mariano Rajoy’s government.
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