Small Cap Value Report (26 Oct 2015) - GBO - I'm vindicated!, RSTR, PIM

On the subject of appointing auditors, is there any reason the stock exchange could not appoint auditors, agree their compensation and charge the costs back to the member company as part of their listing costs? The exchange's auditor appointment activities would then be overseen collectively by a committee of the exchange members. This would avoid corrupt controlling shareholders getting on to Audit Committees. Anyhow, the current system has inherent problems as Buffett points out since whilst technically auditors are appointed by an Audit Committee and answerable to the shareholders, in practice auditors often work for a chief executive able to hire or fire them, and decide their pay, with the Audit Committee unable or unwilling to stand up to an over-reaching, or simply corrupt, chief executive.

Oh, is that the time? Night!

Well it's certainly been a lively day on here. I never had a position in Globo (LON:GBO) or Quindell (LON:QPP) for that matter but it's always interesting to watch these things unravel from the sidelines. I often considered taking a short out but it's so difficult to get the timing right as these things drag on for years. Far better for your sanity to stay out of these 'dubious' companies. As the saying goes "The market can stay irrational longer than you can stay solvent". This can so easily apply to shorting stocks and finding yourself massively under water with a position; what with all the volatility, the PR spin and the bulletin boards.

Well done to Paul and TW again, you deserve far more recognition than you receive but have thankful readers for highlighting all the red flags along the way.

Shame on the nomads, the brokers, the directors, the LSE and the auditors. Do you think Cannacord quit with immediate affect in outrage that the cheque for services rendered just bounced?

As someone of Greek descent who grew up in Greece, I am horrified and saddened to see yet another hit to the reputation of that already-battered country with this Globo (LON:GBO) scandal. Strangely the news is completely absent from the finance pages of the couple of Greek newspapers I have had a look at today... I wonder why?

Globo seemed ostensibly like a different beast to Naibu and the other blatantly fantasy-world Chinese companies, being based in an EU country and with genuine verifiable products, offices in the USA etc. So it's not surprising that many investors though it was 'kosher'. Well, arguably it was (more or less) kosher operationally, but financially it looks like not just highly irresponsible management/accounting but now downright fraud.

I did hold some Globo shares briefly, but sold out at a small loss when I decided to heed Paul Scott's warnings about the seriously dubious accounts. So thanks Paul, you made your case and stuck to your guns!

As many have said, there are an awful lot of people and organisations who could (and most definitely should!) have flagged up Globo's problems much sooner, rather than allowing them to crash and burn. The company could probably have been rescued and perhaps hundreds of jobs saved, if that had happened. While shareholders would have lost a large chunk of their investment, at least it would not have been a (seemingly inevitable now) complete wipeout. All we can hope now is that at least some of the jobs can be saved, if someone comes in and picks up the shattered company for a song? Cold comfort for shareholders though.

Auditors, Nomads, and especially the NEDs (who have been mentioned very little so far, but are there specifically to oversee the executive team) - all have been in severe dereliction of their duty, and, along with the senior executive team, I hope they get what's coming to them. However I fear that they probably won't :-(

I think what this highlights is that proper research should always be done on any shares bought which means that looking at a few ratios and TA is not always enough. Having someone like Paul looking at companies is part of the research we should pursue. We should not believe everything we read but we should try read as much as we can so that a balanced opinion can be gained. In this instance the red flags highlighted should have at the minimum sought us to examine more closely. I consider myself fortunate that when looking at Globo what seemed at first impressive, seemed later dubious. As the old maxim in Diy says measure twice cut once, I say research, research, research and then buy

If you want the Board to look at something where you think there has been abuse then do please provide the detailed information for ShareSoc. We are not at this stage aware of anything other than Roger voicing and writing his own personal views and certainly not representing them as the Board of ShareSoc policy or stance on a given subject.

Can I suggest giving this a few days to calm down and for all investors to try to work together with ShareSoc on this as it is clearly a big issue..... there has been a lot of invested money lost and as with all the China frauds it does not sit well with investing in AIM companies doing business and based outside the UK.

We need to improve this situation and we need a strong voice that regulators, investigators, the AIM policy team and LSE take seriously.

Globo (LON:GBO) seems to reflect in minature a general problem with AIM directors and companies.

On 29 September, it announced in its interims "revenue up 56%", "The Group continues to build on it strong recurring revenue streams", and "Profit before tax rose 37%". Hardly sounds like the sort of company that would have its shares suspended less than a month later, does it?

And this is kind of the problem. Words mean nothing.

Next time, ask yourself this: what is a company that grew revenues fourfold over five years doing on a PE of less than 3?

Cashflows from operating activities were consistently below net income, from which further capital expenditures were deducted. The company only once, barely, made any positive free cashflow. On top of that, there were plenty of placings.

Although the company had a high ROCE, it only achieved it by shovelling its costs onto the balance sheet.

The good news is that you don't necessarily have to be able to spot fraud yourself; you can simply do a search on Stockopedia to see if Paul Scott flags possible accounting frauds. If he does, then just move onto the next one. Investing is a percentages game. You don't have to spot the next Microsoft.

It is slowly dawning on me that investing really is "the losing game". In other words, it's less about the grand slams (although winning is of course important), and more about avoiding horrendous gaffs. Charlie Munger's advice is spot-on here: tell me where I am going to die, so I won't go there.

No doubt I'll still need reminding of this in a few month's time, as I am far from removed from making stupid mistakes.

I think everything in this particular episode needs looking at including any colour that any of the auditors can add.

Can we please concentrate on the company and what has happened. There is nothing to gain from attacking Roger over his previous stance on Globo and he has admitted that he made errors of judgement based on information that he considered accurate and was now false ! Roger is not to blame for the downfall of Globo and we need to concentrate on all those involved in the conduct and criminality that may have caused investors to lose their investment here.

Roger...I think it best if you now refrain from commenting as your personal comments are inevitably linked by some to ShareSoc and this is potentially damaging to what ShareSoc wants to achieve for shareholders in Globo and in protecting investors in all similar situations the future. I have had many personal emails on this subject and I think this particular thread is causing further unnecessary concern. Maybe we need to host an event solely to discuss Globo at some point and film it so that everyone is clear on what is said.....to be honest trying to put across a personal view on something like shorting via Twitter or short BB messages just does not work and can be taken the wrong way or out of context.

Congratulations Paul on your excellent work on Globo. I read your SCVR daily and have gained much from reading it.
However, I freely admit to being a complete moron, as I have held Globo since 2010, and in fact it was my largest holding. I have never commented on any of your analysis of Globo previously, but would like to thank you in hindsight for the difficult lessons that I have learned today and for your outspoken thoughts on this and so many other companies. I admit that that I had fallen in love with this share and was taken in by a charismatic CEO. I accept fully the responsibility for my loss. When l initially bought shares in Globo in 2010, I saw a fast growing software company. Over the years, I scratched my head regarding why the valuation never reached where I thought fair value was. As the valuation multiple got cheaper, I was blinded to the concerns that were raised by others. I accepted the reported figures and the narrative coming from the company. I have been amazingly naive and overly trusting.

I have been investing for 10 years and have been fortunate to have done well over the years, investments allowing me to build the home of my dreams, and I have learnt much from reading and listening to other investors. I would encourage anyone who bought shares in Globo to take the opportunity to reflect on the mistakes they may have made. I will certainly go forward from this much wiser, admittedly a fair bit poorer, and determined to incorporate what I have learnt into many investments long into the future.

Interesting comments re the auditors failure,for that is what it is. However they just missed the fraud the directors committed it. Also BDO clearly must have known something was wrong, as they resigned. GT clearly made a bad judgment call and it will/should cost them. But the real baddies in this are the directors who frankly are the crooks.

Sorry I don't get it, Roger had an opinion which he believed in and shared, as does TW and Paul on many companies. whether anyone agrees with it or not its up to them whether they take It on board. It's called taking ownership of your own actions. You only have to read the many BBs to see many PIs back biting, name calling etc all because someone else has a different opinion. The told you so attitude belongs in the school playground and the first man to realise that is the bigger man.

Good evening Roger

You said.."These matters are much more complex than can be covered by sound bites on bulletin boards, as was the issue of the auditors changing at Globo "

I'm sorry but I disagree , these are precisely the issues that we should be discussing , are you still of the opinion that BDO resigning with that interesting wording wasn't a massive red flag? Iirc you spoke to the company at the time and reported back on these boards that you were happy with their explanation . Yet now these are not matters we should discuss on BB's?

Well you might wish to spend all your hours writing comments on bulletin boards and educating folks about investment realities but I simply do not have the time to spend doing so. Paul is paid to write for Stockopedia. I am not paid by anyone.

Roger -

" These matters are much more complex than can be covered by sound bites on bulletin boards, "

You may not have realised that it is precisely comments such as the above which come across as arrogant and condescending to many people on this board. It certainly gets my goat.

There is no reason why the SFO or City of London Police could not pursue any errant persons in Globo and I think fraud is an extraditable offence. Please note that I am not against shorting per se. I couldn't care less if someone borrows stock and then sells it. What I don't like is naked shorting and folks shorting who overstate their case against a company while doing so. These matters are much more complex than can be covered by sound bites on bulletin boards, as was the issue of the auditors changing at Globo.

IIRC Jim Mellon said that companies liked floating on AIM rather than in the US because they were likely to be sued.

I think it's clear that many directors are engaging in what amounts to fraud.

"One of the difficulties we have experienced in previous campaigns is the absence of a UK legal concept of "fraud against shareholders", unlike the US."

Then this is one of the first things that needs to be looked at !! A threat of class action from shareholders should focus the minds of alot of these wayward company directors and their cronies

Paul - you deserve great credit for bravely criticising Globo despite a torrent of abuse over the years from some of those who chose to ignore your warnings.

I am glad to see Roger Lawson of ShareSoc has now accepted he might have been wrong. Well done Roger.

ShareSoc does a lot of very good work and no one works harder in the interest of private investors than Roger. However, Roger's personal hostility to short sellers has caused ShareSoc to appear on the wrong side of the debate (even though most of the ShareSoc board do not share his views). ShareSoc should make its collective position known on short selling. It must be in the vanguard of protecting private shareholder's interests by helping to expose potential frauds and accelerate its campaign to improve regulation.

...and I am remiss in not thanking Paul for his fantastic work in highlighting the issues at Globo. I am always wary of companies that, for one reason or another, seem incapable of turning profits into cash, over an extended period of years.

Just another anecdote that highlights this point - and also some of the difficulties in improving the audit system. I have a good investing friend (known to Paul too), who had been sold on the quite convincing story of Aero Inventory, a few years back. He is a qualified auditor himself. I was invested there for a period myself but, after several years of the company finding continuing reasons to raise more funds for expansion, I became concerned that all was not as it seemed, so sold out. Despite me pointing this out to my auditor friend, he found it hard to believe that anything was wrong - until eventually, it emerged that the apparently massive inventories on the company's balance sheet had been mis-valued and the company collapsed.

As Jaknife has pointed out above, some frauds are not easy for auditors to spot and it is important to understand the limitations of the external audit process, which must be distinguished from what internal auditors & forensic accountants do.

One weakness of the current audit system, however, is that auditors (like AIM NOMADs) are paid for by the companies they're auditing and appointed by a committee of directors. This is an issue we have considered at some length at ShareSoc and we've advocated the concept (which has been applied in Sweden) of committees of shareholders being responsible for appointment of auditors and, for that matter, for the appointment and remuneration of directors. Our proposals are set out here: http://www.sharesoc.org/Shareholder%20Committees.pdf

Mark

Congratulations Paul - at some forthcoming Sharesoc / Mello / other meeting I'll introduce myself and force a beer upon you. Beware!
Andy

Well done Paul, it's great to call it right with GBO, you clearly knew what you were looking at.

Just for reference being a chairman gives you no higher status than any of your committee members, you are merely the designated voice piece for that committee to be able to pass on discussed and agreed articles. I wholeheartedly agree with Mark and David, it's a committee of a number.

Whether long or short, not everyone gets it right all the time, that's impossible. I know I have had the odd blooper in earlier days. Shares may have been tipped in mags or by some calling themselves tipsters or professionals but if I had bought any wrong uns, I would be the only one to blame.

Yes clearly there is some way out of date info on my Stockopedia and Twitter profiles, I will correct. ShareSoc directors are given here:  http://www.sharesoc.org/directors.html . I'll even put a more recent photo on there, although even that might be somewhat misleading as I have lost 15kg in the last few months on doctor's orders.

I read an analysis on Stockopedia, after I had purchased some shares, and decided as a result of the poor debtors ratio, lack of cash, rising intangibles indicating capitalised costs, and lack of cash generation to sell them. I have now read the report issued Friday, and it would seem clear fraud is involved, I tried to check out 3 of their distributors, using the Globo web site, and the report to cross reference things. The report checked out. This coupled with the RNS announcements, and also the fact the s/ware receives lousy reviews (should have checked this at the time of investing) makes me realise the company is a dud. I was perplexed by it all, as the numbers just seemed too good to be true. Because they were !. It has paid for my subscription to stockopedia, by cashing out of this investment a few days after I bought in (I had intended to hold them for 3-4 years). A lucky escape, suffice to say as soon as they are removed from suspension I will be shorting this one.

I suspect the big problem in Globo has not been capitalising costs but simple revenue falsification or "channel stuffing". There was a previous AIM software company example of the former which was Torex Retail which did result in criminal convictions. Likewise Quindell seemed to be an example of dubious revenue recognition for other reasons. But it is very difficult to identify false revenue reporting in software companies simply because no physical transfer of goods (and hence no obvious linked costs) is involved. But the cash to pay for them does not arrive, which was the focus of Paul's past comments of course.

As regards ShareSoc, I am sure there are numerous people who would wish to put their name forward to take over my responsibilities on the board, or even stand for Chairman (I am not the Chairman). If so please let me have your names.

As I said in TwiTter Paul, thank you for this the lessons we have all learnt from you about Globo (LON:GBO) and investing in general. I made £800 out of Globo (LON:GBO) and then sold because of your comments here.

As far as IC I don't subscribe because i. I would rather do my own research and ii. They seem to work on the basis that if they recommend a dozen shares a week they will have recommend 25 shares a week in a couple of years they will be sure to have had some winners.

But in general I would have thought that we all have opinions and these by definition will be different to the opinion of others and we should respect this. It does not warrant abuse. Me, I read, think, research and then decide what to do. I don't just listen to Paul or Roger or Simon and say I am going to do what he says. That's just mad.

Come on guys....Roger Lawson is not the only director in ShareSoc. There are eight of us and we often have serious debate as a board over various issues that are raised by investors as members or require a campaign or shareholder backing. I have more battles with Roger than anyone else but I still respect the fact that he works exceptionally hard at zero cost to the organisation and certainly has the needs of genuine investors at the forefront.

He does call things wrong occasionally (some would say regularly !) and can be very hard nosed about some issues but he does accept when the Board make a democratic decision and has accepted his overall judgement on Globo was clearly wrong but presumably biased by RNS information and his general knowledge of software companies (which once again may differ from others assessment) so his blog today has reflected that change of stance.

However to treat ShareSoc and the hard work ALL the directors do as just being Roger lawson and somehow thinking withdrawing a membership or not considering the organisation as worthy is plain wrong IMHO.

Investors and shareholders need a strong voice acting for a large group rather than individuals trying to create change and ShareSoc has achieved some fantastic things. We have an AGM every year and you are entitled to vote as a full member so if enough of you feel so strong then you are entitled to vote against Roger being re elected but better than that why not come to one of our meetings or indeed the MasterClass on 4th November and simply engage with RL and other directors who will be there. We need to know what members want us to do....but for sure without ShareSoc and its valuable members driving against issues that hurt investors then the markets would get far worse !

David

Hi Paul,

Well done on your continued excellent work in relation to Globo plc and not forgetting the many questionable accounting practices highlighted by you often daily in other companies

There are obviously thousands of books on stock investing. However are there many books on teaching the skills on reading company accounts for simple investors.

Is there any books or videos that you Paul or other readers would consider worth reading or viewing? Ideally the books might show the tell tale signs of companies misrepresenting their actual accounts with examples.

Regards

Dearg Doom

I posted some comments on the Globo article that Simon Thompson put out at the time raising a number of red flags that should warn off most investors. This led to an email exchange with Simon and he got a bit upset after a while. I must have annoyed him as he removed the comments I wrote.

Today's article by Simon mentions that he is a bit worried about Globo now ....

Surely no-one is exempt from mistakes; we have all made massive howlers. Even Tom Dobell, of M&G Recovery Fund, thought Quindell (LON:QPP) was legit.

At last I've found the secret, that guarantees success: to err, and err, and err again, but less, and less, and less.

@all - please can we keep the discussion civil here. Roger defended his own side in Globo and has likely taken a personal financial hit over these proceedings. He's put his hands up to say he might be wrong. Let's all please respect that.

Stockopedia should be a place where we all welcome contrary opinion, as it's the only defence we've got against confirmation bias. I don't want us descending into a herd mentality, and I don't want Roger (or anyone else) to feel that they can't submit their contrary opinions.

Many here have been vindicated. That should be enough without any "I told you so" playground banter.

This is what Simon Thompson said in the IC "In my view it was only reasonable to accept that the financial statements given to the company’s auditors, and the replies given to my questions, were a true representation of the Globo’s financial position." - that's after he grilled Costis personally for 45 minutes on the issues raised by investors in the summer. He says a lot more also which can be read on the IC web site by subscribers.

About 10 years ago I invested in Assetco (LON:ASTO), a company involved in the "provision of management and resources to the fire and emergency services" which among other things had won long term contacts to provide and manage equipment (including the fire engines) to both London and Lincolnshire fire brigades, and hoped to win other similar contacts. This looked to me like good business, but after a few years it all went up in a puff of smoke as it became clear that the contracts were onerous. Fortunately the business was saved by some neat foot work by other investors but existing investors took a very large bath. My holding, then worth many thousands, wouldn't now cover the dealing costs to sell them. The only glimmer of hope is that the company has built up a large cash balance and is bringing an action against the former auditors that goes to a mediation hearing this month. Who were the auditors? Grant Thornton!

Perhaps as investors we might want to take more notice in future about which auditors are in fact signing off the audit reports at the companies we invest in?

As regards Grindertrader and Rhomboid1 comments I never apologise for reports made in good faith and as I said in the blog I never recommended folks to buy or sell Globo. In addition I gave warnings about the riskiness of the stock from very early on in its life as a listed company. And I won't be resigning from ShareSoc as my views on those who combine shorting with often inaccurate reports on companies have not changed. We shall no doubt see in due course how accurate Quintessential's report was. I do not agree with the hypothesis that everything folks like Quintessential say are bound to be perfectly accurate simply because they are one side of the trade.

No apology Roger? I thought Sharesoc was about defending and protecting the rights of Shareholders, rather than you using the platform to promote your wrong opinions on stocks

Here's my comments on the latest news at Globo: https://sharesoc.wordpress.com/2015/10/26/globo-the-last-straw which might interest some as I have been accused of being overly positive on the stock in the past. I'll clearly need to ask Paul to examine my investments in future before I talk about them.

http://www.stockopedia.com/content/insititutional-interest-in-quindell-is-gathering-pace-81521/?comment=40#40

Still might be worth setting up a short-based 'Bargepole' fund with Fundamental Asset Management. Client money would surely flood in :-) Though sadly GBO and a few Chinese frauds have now been and gone in the last year or so :-(

Mayn

I believe Simon Thompson has written on Globo today but I can't access it.

I don't read Simon Thompson, but I take it he's been around the block a few times, and it sounds like he should know better.

I remember when I was a trainee accountant - what a soul-crushing job that was - a partner would split out the money a client made on the petrol side of his business, and the service station side. You look at the margins to see if anything looked odd. We did this because we knew that the Inland Revenue would definitely do it, and we didn't want to make ourselves look wallies.

So it's hardly as if auditors can't or don't know about these things. Seriously, just what is the point of having expensive audits, shuffling through a bunch of tedious paperwork, if a simple drill on the accounts tells you that it's a wrong'un?

Kudos to BDO for resigning when they knew that they wouldn't be able to gather enough evidence to satisfy themselves that it was legit. Grant Thorntons, not so much. "In our opinion the financial statements give a true and fair view of the ..." http://4abqpl4diue82s9cf74f1g99.wpengine.netdna-cdn.com/wp-content/uploads/2015/06/Annual_Report_2014.pdf (page 52).

On 28-Jul-2015, the company issued an RNS regarding the share price movement, in which they state: "Globo is not aware of any material reason for the decline in its share price." (http://www.investegate.co.uk/globo-plc--gbo-/rns/statement-regarding-share-price-movement/201507281558543464U/)

Hmm, that may yet prove to have not been strictly true, mightn't it?

Thank you for another interesting article Paul. How can one get a list of company's that Grant Thornton are LOOKING AFTER ? So as to avoid them.

Simon Thompson has made a couple of errors in the last 2 years, notably including Naibu and Camkids. Naibu was particularly silly in my view as even my quick basic research highlighted multiple red flags (such as the CEO giving company money to his mum). Underlines the importance of DYOR and avoiding getting caught up in any narrative about a company.

Awesome comments, much appreciated, thanks everyone! It's really wonderful to hear cases of where my warnings have saved real investors real money, very much makes it worthwhile to take all the abuse from others.

Re closing out of short positions - that will probably take some time, and it will depend on whether the shares come back from suspension (unlikely in my view), and whether there is any cash left (again, probably unlikely, but who knows?)

My broker told me that spread bets will probably be closed out at 0p once it becomes clear that the shares have nil value. Or sometimes I know IG have closed out bets, but created new bets for any proceeds from a liquidation, etc. So there are various ways they can do it, but essentially the bets should be closed out in some shape or form once it becomes clear what the end game is.

I've also heard of instances where shorts can buy stock for a nominal amount from someone who is long, off market, and then use that stock to settle a short.

Regards, Paul.

"Note the words "up to" in the first bullet point. So it's not clear exactly when he dumped his stock"

I noticed that, too. Seems that Papadimitrakopoulos has been a bit of a naughty boy wrt disclosure.

Of course, the nomads wouldn't have known anything about those arrangements ... would they?

Good call Paul. Well done.
Looking forward to your report on BOO coming up.

"notify the matter to the appropriate authorities"
I should hope so, too.

Afternoon Paul et al,

Quick question re shorting: As is the case here, shares are suspended, and individuals / institutions have open short positions in said share - how do the shorters make their money?

I realise that I'm probably being a bit thick :|

Regards,

DS

Great Call!!

I do not understand how the Auditors (there has been a few changes of Auditors - always a red flag) missed this one - obviously very easy to pull the wool over their eyes!!

How did the CEO (now ex) Costis Papadimitrakopoulos manage to sell 42million of shares (holding had been 69 million-19% of total) without anybody noticing is also very strange

Forum European Smallcaps GmbH - this outfit must be sick - topped up their holding by 600,000 on the 20th. Now have 5%!!

Paul

I'm glad that I had a chance to chat to you in person at UK Investor in April and apologise for being one of the more bullish types 18 months or so ago who had a pop at you over the original Bear Attack on Globo. I was fairly long on them then and no-one likes to find the price sliding downwards. I have actually been one of the more fortunate ones. In a miracle for me (I usually do the opposite of buy low sell high) I bought in the low 20's and sold half in the high 60's, with the balance earlier this year in the 40's. By the time I came to sell the second slug, I'd become convinced by your analysis and have actually become a big fan of Tom and his team since then (I was already a fan of you!) There is no substitute for proper forensic analysis and you did a cracking job on this one. I'm just glad that I came out of it with a few grand profit rather than a thumping loss, which really should have been my just desserts.

Congratulations Paul - I am pretty new to Stockopedia but I look forward to reading your reports every day and tuning in to your interviews and audiocasts. I am learning a lot from you and benefitting from your background, experience and superior ability to read between the lines - things I lack. For the last nine years I have been studying investment, reading widely and pretty deeply and earlier in the year took voluntary severance from my job as an engineer to go full time as a PI. It is disconcerting how after reading about 50 books on investment I can still - largely through wishful thinking borne of over-ambition - be suckered into Globo. Yours was the best-articulated bear case against Globo I had seen and I had been reversing out of Globo after reading your reports on it - you answered my puzzlement and saved me from a much greater loss, so again, thanks!
It was irritating even to me to see the personal attacks on you and read PIs with, no doubt, in many cases less understanding of accounting than me, call you an amateur when you are obviously a pro (and as Ed Croft so rightly says, a legend!), so it must have been enraging to you and I'm very pleased you have been vindicated. I am doing many things right and choosing several of the companies your accomplished investing friends then rave about, so, as you and your investing mentor say, I can really see how my performance could start to fly if I become a little more cynical and cut out the errors.
Meanwhile, shame on LSE, and Globo's directors, Nomads and auditors - once again, thanks for nothing you 'auditors' - and three cheers for Paul.
Regards,
Ed Miller

Time to introduce the Scott Bargepole Index?

Thanks Paul. I'm one of those investors you saved. I bought some stock after reading Simon Thompson's piece in IC. That together with the stock rank made me think Globo was a good company in a growth space that had been harshly treated by the markets. I had only recently joined Stockopedia at that point and didn't realise the stock ranks could sometimes give a false indication of what is going on at a company. (A classic case of rubbish in/rubbish out producing poor computer generated analysis.) The share price headed downwards almost immediately after I had bought. I was thinking that I would hold for a recovery and ignore the fall. I even bought a few more at a lower price. Your warnings made me realise the company might not be high quality or good value, so I sold everything and took the loss. I'm glad I did, and thank you so much for speaking up and holding to your views, despite the criticism that you got from some. You probably saved me £9000. Simon.

Paul,
Thanks - you kept me out of Globo. There has to some way Stockopedia can mark down the StockRank for these accounts. I'm sure Ed will give it some thought. I know this is tackled to some extent with the Earnings Manipilation status, but Globo has ranked very highly for a long time. I know the rank isn't fool proof and is just a tool.
All reminds me of the crap that David Einhorn got when investigating Allied Capital and documented so well in his brilliant book, "Fooling Some of the People". Shorters do a brilliant job in my opinion and I won't go near a stock if it's shorted and listed on the FCA web-site.

Good call

Well dome Paul. Good work.

Thanks Paul.
A week of smugness is completely justified. And yes, you did save me money on this one. And:
* I do hope Grant Thornton are properly penalised - not because I want to see them suffer, but because it might encourage auditors to be more careful about carrying out their mandate. "It's difficult to find these problems" is not a good enough excuse. BDO refused the job because they were not allowed to do the necessary checks. Grant Thornton could have done the same. If Paul has seen the problems just by reading the balance sheet, surely the auditors should have seen the same issues and would have had the opportunity to make the necessary checks. A review of the validity of debtor balances is a essntial part of an audit.
* the auditors job is to protect the creditors and shareholders by confirming that the accounts are true and fair. If they fail they should be held responsible for the losses. How can we as investors play our part in the allocation of capital to good businesses when the safety checks - auditors, NOMADs, ... are allowing such frauds
* so again, thank you Paul for being one of the few effective defences available to us
* actually, I feel quite sorry for Simon Thompson. He does make quite a few good calls. But it seems that his weak spot (as stated by JollyBiologist above) is his naivety. He believes the numbers and/or the press reports. It must be painful to get it so wrong - Globo, Camkids, Naibu - in full view of the public.
THANK YOU!

like something out of Captain Pugwash perhaps?

Thank you very much, having subscribed to this site for a while now it is certainly proving its worth.I was tipped this share by my broker and didnt buy it becuse of comment on this site and share prophets. I would love to see a "red flag system" on Stockopedia to highlight when a share is in the sights of the likes of Paul or Tom Winnefrith as rotten because of their directors, Nomad or accounting practices.

can I suggest a simple sinking ship image under the stockrank

Well done Paul and thanks again

jonmark1956,

"On the question of shorters being always right. I'm intrigued why they are shorting Carillion."

Am not 100% familiar but I understood that there's a large position hedging a Carillion convertible? So not a "short" betting that the price will go down but a hedge against the possibility that they may receive shares under the convertible rather than cash.

JakNife

roque22x,

"I agree well spotted. The only thing that I am a bit puzzled on is should auditors not pick this up when looking at accounts?"

The specific fraud in this case is referred to as "Pig and Pork" and relies upon sales being made to an undisclosed connected party. It's incredibly difficult for an auditor to detect and in particular very difficult where subsidiaries are audited by different auditors to the main group auditor, which was the case for Globo.

JakNife

On the question of shorters being always right. I'm intrigued why they are shorting Carillion.

I am new to investing and really appreciate your daily reports as do many other people, you are a star and thanks to you i have been able to learn and keep away from these's companies.
Great job Paul many thanks.
By the way i love your new site and would be happy to subscribe.

Well done, Paul. Great call.

Very sad for genuine investors who have been caught out by this, let's hope the Company directors get their just desserts, though I somehow doubt it. As you say, 'Once again, it has been shorters who have been the only effective regulators in the market. What a total disgrace'

So, are there any other GBO's that you've spotted, still out there lurking..?

Paul - Can I ask about shorting.

I understand that shorters can be the most astute analysts in the markets however in most instances can it be quant funds or tactical trading? Looking at the top 10 shorted companies - there are some large blue chip such as J Sainsbury (LON:SBRY) (10% SHORT), WM Morrison Supermarkets (LON:MRW) (12% SHORT), Carillion (LON:CLLN) (18% SHORT) and one I've just bought --- £ HOME , which is 8% short.. It's difficult to know who is shorting and why these companies are being shorted. Should I be concerned about this level of shares on loan for these blue chip companies?

Cheers,

Ben

Well Paul, I think you are entitled to a week of 'unbearably smug'. Along with some others, more experienced and better resourced than me, I got this one completely wrong. I suspect your stance tempered my enthusiasm and may have saved me a worse loss.

One aspect of this case where I have always been aligned with you is disgust at the general tone of those disagreeing with your (and others') opinion and the personal abuse to which you and other bears were subjected. It helps nobody, least of all their argument, and makes much of the private investment process quite unpleasant.

Hi Paul - Let me add my congrats. Once again you have saved my bacon. More power to your elbow.
Regards, Ram

I believe the issue for Simon Thompson is that he comes into the office each day and looks at a blank screen and knows there is a deadline to write something. He is nearly always positive and is no doubt fed leads and tips by PR types.
I'm sure the genesis of this was a PR spinner ringing up with a potentially bullish piece which could be concocted on Globo.

Brilliant work Paul - thanks.

Simon Thompson has been having a shocker - Globo and those two Chinese companies (Naibu and ...?) that he put in his New Year tips.....

How do companies like this get away with it for so long!? It's beyond me.

Brilliant work, Paul, well done! Was never remotely interested in Globo but it's been fascinating soap opera watching the Globo apologists try to rationalise what was going on. And it's yet another black mark for Simon Thompson. It's very odd - he makes some very good calls, but he is also astonishingly naieve.

I agree well spotted. The only thing that I am a bit puzzled on is should auditors not pick this up when looking at accounts?

Well done Paul for keeping banging the drum in the face of all the opposition. How anyone can seriously think a company which claims to €100m+ of cash is not a con when it is trying to raise a junk bond at 10%+ coupon is staggering. Investors have very short memories of similar frauds.

Paul, Many congratulations on your fantastic work over the years on Globo!

Great job Paul! I was looking at Globo as an investor becuase it was so high on the Stockopedia ranks (& also REFS etc), but you'r caution stopped me buying and also made me look deeper at the accounting anomolies.

Thanks for once I've dodged a bullet not ran in front of one! :

Think Stockopedia do need to review their rankings to catch these worrying recurrences though...Maybe with a "bargepole filter"!

Thanks Again!!!

Regards
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