Is Globo Plc A Value Trap Or Value Play?

Over the past few weeks, Globo (LSE: GBO) has become one of AIM’s most controversial companies. However, this isn’t the first time that Globo has attracted criticism. The company has been under fire for years now regarding its accounting policies.

But after the release last night of a report from Quintessential Capital Management, which claims that a large portion of Globo’s business has been fabricated, it now looks as if Globo is in serious trouble.

The company has requested that its shares be suspended following the scathing report as management needs some time to put together a conclusive response to the accusations made.

Quintessential claims that there is:

“…overwhelming evidence suggesting the existence of what appears to us a large-scale conspiracy to deceive investors and creditors through pervasive and systematic accounting manipulation.“

What’s more, analysis suggests that more than half of Globo’s business is spurious:

“While a minor portion of its business is authentic, the results of our investigation strongly suggest that at least 60% of Globo’s turnover is fabricated. The company’s alleged activities, in our view, suggest possible criminal behaviour and to cause its total demise if exposed.”

These are very serious accusations, and shareholders should be extremely concerned. There have been few cases where such damning claims have been made and the company has pulled through.

Red flags
It seems as if the City has been wary of Globo for some time. The company’s recent failure to find buyers for a high-yield bond was a big red flag.

According to pension fund managers, the demand for high yield bonds has surged recently as the yield on more secure sovereign issues has continued to decline to record lows. With this being the case, it was pretty easy to see through Globo’s excuse that market conditions had prevented the company from selling its high-yield bonds.

Further, since 2009 Globo’s revenue has grown at a compound annual rate of 35.3%, making it one of the fastest growing companies in London. But despite this growth Globo’s valuation has remained depressed, a strong indication that the City didn’t believe the company’s growth story.

What’s next?
Unfortunately for Globo’s existing shareholders, it looks to me as if the company is a value trap. It is rare that a company survives a bear raid like the one that was launched on Globo yesterday. The company’s reputation now lies in tatters, and even if management can prove that Globo isn’t a fraud, it’s going to be difficult for the group to find business partners going forward.

Still, if Globo’s accounts are to be believed, the company had over €100m of cash in the bank at the end of June. This cash cushion will give the company some wiggle room, and the financial firepower to mount a comeback.

Uncertainty
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Globo Plc. – What is missing in the Research Report?

As most of the followers of Globo Plc. are aware the US based hedge fund firm Quintessential Capital
Management (QSM) published a research report on Globo Plc (the report is available for the public from
Shareprophets.com) on Thursday indicating that above 60 % of the revenue was fake and that Globo was
actually big fraud. While I think QSM make some good points and that Globo have some explanation to do

edit 28th - http://lordshipstrading.blogspot.co.uk/
– I think there are some huge missing points here.  
But first I would like to thank and congratulate QSM. They have done an incredible job digging op dirt at
Globo and reporting that to the public. The markets needs short sellers that are willing to do the dirty work
to cover frauds etc. But as I stated above – I think they are missing a lot of things

Globo was not merged into an Israel Company:

QSM states that Globo reversed into an Israel company listed on the AIM in 2007. Just to make everything
clear. This is false. Globo did a reverse merger with a British Company listed on the AIM. The company they
merged into was named Israeli Acquisitor I plc – so maybe this is where QSM got their facts wrong.  ................

HTTP://www.proinvestor.com/uploads/boards/73484_Globo_Plc_update.pdf

GLOBO plc
("Globo" or "the Group")

Company Statement

Globo plc issues the following statement:

On Friday 23 October 2015 the Board of Directors of the Group became aware of a report published by Quintessential Capital Management ("QCM").

Following the announcement by the Company on the morning of Friday 23 October 2015, an emergency Board meeting was convened as soon as practicable for Saturday 24 October 2015 to discuss the allegations in the report and to ascertain the actions that would be required to resolve the matter. It was intended that an appropriate independent forensic accounting team be appointed to investigate the claims.

However, at the Board meeting, Costis Papadimitrakopoulos the CEO of the Group brought to the attention of the Board certain matters regarding the falsification of data and the misrepresentation of the Company's financial situation, and offered his resignation, as did Dimitris Gryparis the CFO of the Group.

Following the meeting and receipt of legal advice, a committee of the board was set up, comprising the non-executive Directors only (the "Committee"). The Committee has accepted the resignations of Costis Papadimitrakopoulos and Dimitris Gryparis from the Company with immediate effect. Gerasimos (Makis) Bonanos (the COO) has been suspended from his duties with the Company also with immediate effect, pending the outcome of appropriate investigations. All of the executive directors have agreed to make themselves available and fully co-operate with any investigations.

The Committee has initiated discussions with appropriate advisers in relation to the next steps and to ascertain the true financial position of the Company. In addition, the Committee has asked the Company's lawyers to notify the matter to the appropriate authorities and the Committee has informed the Company's principal bankers.

Further announcements will be made in due course. In the meantime the Company's shares will remain suspended from trading as per the dealing notice on Friday 23 October 2015.

It certainly looks bad news for shareholders.

yes, I imagine we can write off any value in this company now.

Written off indeed.

GLOBO plc
("Globo" or "the Group")

Company Statement

Globo plc issues the following statement:

On Monday 26 October 2015 the Company announced that Costis Papadimitrakopoulos, the former CEO of the Group, had brought to the attention of the Board certain matters regarding the falsification of data and the misrepresentation of the Company's financial situation.

Since that announcement, the Company has reported this matter to the appropriate law enforcement agencies in the UK, Greece and Cyprus.

In addition, the Company was notified on 27 October 2015 that it is under investigation from the UK's Financial Conduct Authority.

Further announcements will be made in due course. In the meantime the Company's shares will remain suspended from trading as per the dealing notice on Friday 23 October 2015

Well written piece in Investors Chronicle online.

Good to see Serious Fraud Office involved and IF CEO and/or CFO sold shares knowing of alleged fraudulent activity and didn't make a public statement, then let's hope they pay the price.

Globo Plc (In Administration) ("the Company")

London - 10 November 2015 - The Joint Administrators of Globo Plc confirm that cancellation of the Company's AIM securities will take effect from 7am 1 December 2015 pursuant to AIM Rule 1 of the AIM Rules for Companies.

The Joint Administrators do not anticipate that there will be any return from the administration for the shareholders of Globo Plc, and therefore they consider that it is appropriate that the securities are cancelled.

In accordance with paragraph 49 of Schedule B1 of the Insolvency Act, the Joint Administrators are required to submit their proposals to creditors within 8 weeks of their appointment and shareholders are also entitled to receive a copy of the report. This report will be made available to creditors and shareholders at www.thecreditorgateway.co.uk (password: Globo) in due course.

The Administration relates to Globo Plc, and not any of the Company's direct or indirect subsidiaries, which remain under the control of their respective statutory directors.

-ENDS