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Gowex Shares Plunge Following Allegations of Financial Fraud

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Shares in the fast growing municipal Wi Fi provider, Gowex more than halved earlier this week following a report that cast doubt on the company's finances.

Short seller, Gotham City Research, which benefits from sudden drops in company share prices issued a report that claimed that Gowex was inflating its revenues and that the company was likely to be making just 10 percent of what it claimed.

The report also claimed that the size of Gowex's Wi-Fi network was just 5 percent of the claimed coverage.

The Spanish company's share price plunged by 46 percent on the news, and trading in the shares has since been suspended pending an investigation. The collapse in the share price wiped around USD1.2 billion off the company's valuation.

Gowex's reported revenues were around EUR183 million (US$249 million) in 2013, but the analyst says that is an exceptionally high number for the company based on its own analysis.

Gowex delivers municipal Wi-Fi networks to cities in exchange for a share of their revenues from advertising, access charges, and also generates an income from mobile network offloading.

Responding to the report, Gowex Chief Executive Officer Jenaro Garciatold Bloomberg News that the broker was "They are mixing facts with lies. We will look into the legal consequences of this,"

The company said that it will issue a formal statement on Monday.

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Tags: gowex  Spain