Reuters Insider - Breakingviews: Gowex bankruptcy
07/07/2014 12:03
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Description: Gowex says its CEO admits falsifying accounts. The
firm's status as a poster child for Spain's
recovery means the fallout will go beyond risk
aversion to junior listed stocks, says
Breakingviews.
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Transcript (May be auto-generated)
Spanish Wi-Fi provider Gowex is set to file for bankruptcy after its chief
executive admitted to cooking the books. Here to discuss, Breakingviews' Chris
Hughes. Chris, thank you so much for joining us. Gowex is one of the brightest
stars on the Madrid Stock Exchange. This is more than just about a company
that's filing for bankruptcy, isn't it? It's tempting to say that here we had a
small, junior-listed company. People should have expected it to be more risky.
It's not the first company on a junior market to have problems like this. But
you're going to remember that this was held up by many as sort of poster child
for Spanish corporate renewal, if you like. So, for it to actually have emerged
to have false accounts, besides filing for bankruptcy, they could have quite
serious knock-on effects. I think it's going to do more than just turn people
off junior stocks. The big concern at the moment across the Eurozone is where
the smaller companies, more risky companies getting access both to bank and
equity finance. So even though you have this kind of mad dash, the kind of
Eurozone government debt right now, for the more risky parts of the economy to
have questions raised about whether you really want to provide them with
finances comes at a very bad time. And as you rightly say, it's not a lone case.
We've had other high profile bankruptcies like Pescanova and also Zinkia. What
does this say - if we look at Spain itself, what does this say about Corporate
Spain? I wouldn't single out Spain here on its own.
The fraud is fraud. It's very, very hard. By definition, fraud is hard to
detect. And Pescanova, for example, wasn't junior-listed. So I think it's hard
necessarily to say that the sort of greater risk around sort of Spanish stocks
were the main market-listed or junior-listed as a result of this in actuality.
But the resonance of it is going to be very, very strong for the reasons I said,
simply because it was held up against the backdrop of an economy that's really
struggling and is really looking for signs of hope for the kind of the totem of
renewal to suffer like this is going to have a sort of big effect. Is it going
to make it difficult for companies wanting to come to market, wanting to raise
finance and indeed, in a backdrop where investors are going to be more cautious
now? Look, it has to have some effect to the margins. I mean overall, we have of
course seen a really strong IPO market in Europe in the first half of this year.
So let's not forget that investors are generally looking for IPOs, they are
predisposed a lot to liking IPOs. But lately, there has been a bit of a sign of
indigestion. So again, to have evidence that high-risk companies are risky right
now, just the CIP markets kind of coming off the boil, again, not helpful.
Right, thank you very much. Chris Hughes there from Breakingviews, talking about
the impact of Gowex looking to file for bankruptcy. I'm Angeline Ong and this is
Reuters