Sell orders separate heaven from hell on the Stock Market. The shares of Eidf Solar, the Galician photovoltaic installation company involved in an accounting scandal for hiding information and for possible manipulation of its balance sheet, lost 69.99% of their value on Monday on the BME Growth. The final price, of 8.93 euros, was made to wait due to the strong offer of titles that did not find buyers. At the stroke of noon this Monday there were some 170,000 share sales orders for 68,000 buys, but finally 34,827 operations have been carried out with a cash volume of 311,000 euros, according to BME data. The last price marked by the shares when the clock stopped, on April 14, was 29.76 euros. That day, the young and promising company specialized in photovoltaic installations had a valuation of 1,721 million euros and astonished the market for its unstoppable rise since the bell was rung, held on July 7, 2021. With the fall of this Monday they have vanished 1,200 million capitalization and it could be more, because BME only allows a value to fall by that percentage at most in a single day.
The CNMV spoiled the party when it decided to freeze its listing last April for “withholding privileged information.” Fernando Romero, its president and CEO, as well as the largest shareholder, with 72% of the titles, had not sent the audited statement of accounts for 2022 to the supervisor within the corresponding deadlines. The only known figures for that year, for the first semester, spoke of a turnover of 197 million and an operating result of 40 million.
It seemed strange: the EIDF audits up to that year had been published without any qualifications. But in December 2022, with a view to making the leap to the next stock market step in 2023 -the continuous market- with a large capital increase, the company had set aside Crowe Auditores, which had been in charge of supervision until then, to hire a prestigious big four, PwC. It was the new auditor who opened the box of thunder. In addition to refusing to sign a clean EIDF balance, he demanded that he complete the analysis with a forensic report, later commissioned from Deloitte.
Then began a viacrucis for investors, who had been trapped in the value for more than four months until this Monday at the expense of the information that, with droppers, the firm was facilitating. The forensic, a tool that combines audit analysis with investigation to detect and investigate illegal activities, uncovered what the auditor suspected: indications of a string of irregularities. Meanwhile, Eidf based its apologies on the “extraordinary growth” that the company had had to face due to the explosion in the contracting of solar panels in Spain.
With the stock market watchdog following the company’s every step, PwC gave last year’s balance sheet a thumbs up in a report released on August 18. It restates the accounts of the last two years. But in the final document, PWC was cured of health: it warned that later “other issues could arise that could lead to other possible errors.” Eidf had ended the year with a negative working capital amounting to 20.9 million and losses of 2.7 million after invoicing 297 million. But the nightmare did not end there for Fernando Romero, who through his company Prosol had to come to the rescue of EIDF to repay promissory notes and clear the maturities that were pressing with the suspended listing. He also negotiated with creditors a waiver to turn the red numbers of the working capital into black. The CNMV, uncomfortable with what happened, sent Romero a letter demanding that he also publish selected parts of Deloitte’s forensic report without adding a comma. The Galician company refused, and in its refusal it slipped that it would defend itself in court against the possible consequences of the publication of the forensic.
After a tug of war, finally last Thursday the CNMV published the paragraphs that speak of disturbing accounting practices. Among others, it reveals that the investigation identified situations “in which documents would have been created, modified or falsified” in operations with third parties. With three of the four partners that were analyzed, the investigations found “evidence of possible falsification of contracts and documents prepared by those responsible for the company, in order to justify the lack of control over the SPVs.” The SPV or Special puppy vehicle are companies established with the sole purpose of being a vehicle for investment in renewable energy projects. The indications point to invoices for non-existent or unjustified services, false documentation to justify credits, works that were charged without being finished or projects where the costs “lacked” economic and operational reasonableness. A kind of flight forward that forced the company to request short-term financing to pay long-term loans. The PWC audit, for its part, also included other incidents that pointed to Romero, such as the “direct or indirect link of certain debtors with the president of the board of directors, without some of the transactions (…) being able to prove an economic substance ”.
In recent days, the investor forums were on fire with these revelations. “On Monday recover what you can before they suspend it again” recommended several messages from users on Investing.com. “It will open very low due to selling pressure, it will threaten to recover something and that will be the moment to sell and forget about it,” predicted one user. On the last day of April that the company was listed, 48,269 shares were moved for an amount of 1.4 million euros. Little activity, as it is an SME and since the majority of the capital (86%) is concentrated in a few hands. The president, with 72% of the capital, is followed by Alejandro Alorda, vice president of Kettal furniture, who has 7.6% through Mas Investment and Julio Sergio Palmero with 6.63% through Memento Gestión.
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