Gotham Research is at it again.

Shares of LETS GOWEX SA (OTCMKTS:LGWXY) (BME:GOW) are down by nearly half in early morning trade following Gotham Research delivering yet another scathing report and establishing a price target of zero on the stock.



Gotham’s previous attack on Quindell

The last report Gotham Research published, as previously reported in ValueWalk, led to the price collapse in the stock price of Quindell PLC (LON:QPP) (OTCMKTS:QUPPD), a UK consulting firm and was controversial to say the least. This time Gotham’s target is a Spain-based provider of wireless service.

Gotham claims that 90 percent of reported revenue does not in fact exist.  Actual revenue, the research firm calculates, is below €10 million Euros.  To determine its revenue, Gotham in part considered the audit fee. “GOW’s audit fee is €40,000, which makes sense if Gowex’s actual revenues are only 5%-10% of reported revenue,” the report notes.

LETS GOWEX’s revenues are suspicious says Gotham

The vast majority of reported revenue is suspicious in nature, as 90% of Telecom revenue originated from undisclosed related parties, tied to GOW CFO & an early investor, the report charged. “We have evidence LETS GOWEX SA (OTCMKTS:LGWXY) (BME:GOW)’s largest customer was really itself.”  The head of Gowex’s investor relations, who signs off on their annual report and financial data, is the CEO’s wife.

Other questionable accounting methods the report highlights involves its reporting a large profit of €42 million in turnover. Suspiciously, the following year the company had only €2.7 in turnover from three salespeople, the report highlighted on its cover.

Issue of LETS GOWEX’s size

There is also the issue of size.  The CEO of LETS GOWEX SA (OTCMKTS:LGWXY) (BME:GOW) claims their hot spot network is 100,000 strong, but other estimates are wildly across the map it.  JB Capital Markets estimates the number to be 35,000 and Gotham’s number is incredibly 5,000.  If true, the claims are similar to a radio antenna being built to eclipse the tallest building and then claiming that the radio antenna is defined as an office building.  The report noted Gowex does not publicly disclose basic metrics, such as hotspot count or wireless revenue segment details.

The CEO, Jenaro Garcia, has had his credibility called into question on several occasions.  Before his involvement in LETS GOWEX SA (OTCMKTS:LGWXY) (BME:GOW), the report notes Garcia was a Director of Advanced Refractive Technologies, “a penny stock fraud whose shares were revoked by the US Securities and Exchange Commission.”  The report frames this with the June 5th MallPlaza press release (in English) “makes demonstrably false claims, the report notes. The same press release in the native Spanish omits the false claims.”  The report also claims Gowex lied to the European Union’s Transparency Register, claiming it spent over €50 mm in political contributions and even wonders aloud if the company is still in business as its web site has not been updated in years.