Tomahawk, WI 07/07/2014 (Basicsmedia) – The Spanish telecom services company, LETS GOWEX (EPA:ALGOW) has collapsed. It proved disaster for the investors who hold shares of Lets Gowex but proved to be a jackpot for the short sellers. The short sellers are set to make a huge profit of more than $60 million in just one week.
The buyers and the short sellers create a balance in the market. The significance of having short sellers in any market cannot be denied. They can bring in the fraudulent companies in light. Moreover, a small amount of profit given to the short sellers in the process of identifying the fraudulent companies is not an expensive deal. In fact it focuses on transparency in the business activities.
The problem with Lets Gowex started last week when Gotham City Capital came out with its report on the company. It stated that 90% of the recorded revenues of Lets Gowex are fictitious. It was clear from the amount of audit fees that Lets Gowex was paying. It was not in accordance with the turnover company was enjoying. Gowex real value is nothing more than zero. Gotham also criticized Gowex for using an unknown auditor. In return, Gowex has said that it will soon hire a prestigious auditor.
Gowex has denied the findings and calls the report as false. It is working to get a better auditor. LETS GOWEX (EPA:ALGOW) reiterated its revenue figures of 182.6 million euros generated in 2013 out of which 25.4 million euros was the revenue generated from GOWEX Telecom and the rest was generated by the company’s wireless unit. Gowex also confirmed that it has got the net cash of 54.8 million euros with equity of 94.4 million euros. As per the company, these are the verified figures by a chartered account auditor.
The entire scene changed when Gowex on Saturday admitted that the revenue was fictitious. It will file for bankruptcy and proved the Gotham City research absolutely right. The other short seller that benefitted from the collapse of Gowex is Valiant Capital. The recent case really justifies the need of short sellers having in the market. They are one of the important means to uncover the fraudulent companies.