Posted on Dec 10, 2019 2020 at 18:32Updated Dec 10, 2019 2020 at 18:34
In two days, Solutions 30 lost almost 26% of its market value. In question, an anonymous report which accuses the company which installs optical fiber and electric meters in private homes, of having links with the Italian mafia, and of publishing false accounts. In May 2019, already, the action had unscrewed when Muddy Waters, the famous American activist had declared, without explanation, to sell short 0.5% of the capital. For a few weeks, on the markets, rumors were circulating. And in recent days, around 13% of the capital has been sold short, notably by a hegde fund, Gladstone Capital Management.
Favorite stocks of small and mid-cap funds
Solutions 30 is one of the favorite stocks of small and mid-cap funds. Founded in 2003 by its CEO Gianbeppi Fortis, the company has grown rapidly. With a turnover of more than 680 million euros in 2019, an annual growth of more than 30% over ten years, it has surfed on the rise of the digital economy and the energy transition. Listed on the stock market in 2005 with a capitalization of 4.5 million euros, the group was valued at 1.5 billion euros last July when it was transferred to the regulated market of Euronext Paris, before integrating in September the SBF 120.
This anonymous report was emailed and via Twitter to financial analysts, managers, and then to the company on Tuesday night. He accuses Solutions 30 of having links with people who have been the subject of criminal convictions linked to money laundering, and of having carried out transactions linked to this crime. The accounts would also contain errors, and profitability and cash flow would not match the nature of the company’s business.
Categorical denial
The group, which is headquartered in Luxembourg, categorically denied all of the report’s claims. Between 2013 and 2016, he worked well with an employee of the accounting firm, the fiduciary of Kiem, one of the managers, Angelo Zito, was allegedly cited in legal cases between 1998 and 2000, in connection with the Mafia. But the latter was acquitted in 2000. Solutions 30 also cites the Luxembourg register of sworn accountants, in which Angelo Zito appears in due form. On transactions related to money laundering, Solutions 30 indicated that, in order to establish new legal entities, it sometimes acquired “empty shells” for the sake of efficiency, which it considered to be a practice of market.
In the markets, we are surprised. When short sellers release negative reports on a security, they don’t do it anonymously. In general, they assume. Either way, financial analysts are convinced these accusations are unfounded. Oddo BHF analysts deemed the answers provided by Solutions 30 to be “convincing”. They “call into question the seriousness of the analysis carried out by the author of the report in view of the errors he makes. “
Solutions 30 has already alerted the Autorité des Marchés Financiers (AMF) and launched legal action, in particular against a person who disseminates false and misleading information about its managers.
This case raises questions. If this report is false, his accusations risk bringing water to the mill of the politicians or actors of the place of Paris who have been campaigning for years for stricter regulations vis-à-vis short sellers, who are in the crosshairs of the authorities since Muddy Waters attacked Casino. If he tells the truth, the damage will be significant for the place of Paris.
