A little over four months ago everything was smiling at EiDF. The Galician company, specialized in photovoltaic installations for the industry, had registered dizzying growth in just one year. It was listed on BME Growth, a market for expanding SMEs. Its stock market value was around 1,700 million euros, already higher than Ibex companies such as Sacyr and close to the value of firms such as Indra. It was the miracle of Barro, the small town in Pontevedra where the company was born and its founder, president and CEO, Fernando Romero, lived. But everything changed on April 14. The CNMV decided to suspend the listing of the company due to the discrepancies that arose between the company and its recently appointed auditor, PwC, which were going to make it impossible for the accounts to be signed within the corresponding legal term.
Now, after listing again after having published the accounts, EiDF worth less than 230 million; small shareholders (they have 13% of the capital) have lost more than 80% of their investment; His top boss, Fernando Romero, who controls 72% of the shares, has seen more than 1,000 million of his assets volatilize… And the worst is that EiDF is in open war with its auditor PWC, with Deloitte (who was hired to do a forensic report) and especially with the CNMV, to which he has formally and publicly communicated, after a harsh exchange of communications in the middle of August, that he will not meet his demands.
And this is not good news for EiDF, which at its peak (we insist, just over four months ago) was about to jump from Growth to Continuum. The prelude to the Ibex. The big leagues.
Omissions and distortions
Are we attending the case of a company with “very relevant omissions & rdquor ;, as highlighted by the CNMV based on Deloitte’s forensic report? to what extent, using the same source, have “created, modified or falsified documents & rdquor;? Are we dealing with the case of a company with dizzying growth, controlled down to the last detail by its founder, and to which “internal control weaknesses & rdquor; Have they caused you serious organizational, financial and commercial chaos?
PwC, an auditor recently hired by the company, refused to sign off on the accounts after finding serious discrepancies in their analysis. The situation reached such a point that the CNMV suspended the firm’s listing and urged that a third party (Deloitte) be hired to carry out a forensic report to analyze the impact of these discrepancies. Based on that report, PwC signed the Audit Report, but with qualifications. In that report, the auditor warned of “significant weaknesses in the corporate governance model and the internal control system”. She also made it clear that the group “has a negative working capital of 20,930 thousand euros & rdquor; (20.9 million euros) which, “along with other issues & rdquor ;, “may generate significant doubts about the ability of the group to continue as a going concern”.
According to EiDF, the considerations of the forensic report “involve, at most, an adjustment of some two million euros that have been recorded in the company’s accounts […], an amount that does not even reach 1% of the global turnover volume in 2022”. The accounts signed by PwC show consolidated revenue in 2022 of 329 million euros, 371% higher than in 2021, with an adjusted consolidated ebitda of 10.6 million, more than double that of 2021.
The corrective of the CNMV
On August 16, the CNMV required EiDF to send it a draft communication of privileged information that summarized and made public Deloitte’s forensic report. EiDF sent the communication the following day, but did not include the verbatim of the most controversial points, which caused an unusual event. On August 21, the CNMV, from its General Directorate of Markets, issued a statement in which it stated that the publication of EiDF had not met “the requirement of the CNMV& rdquor; and added that “The published information is not complete and includes very relevant omissions.”
The CNMV statement, very harsh, explained that Deloitte’s forensic report contained “evidence of great importance for EiDF shareholders& rdquor; and highlighted “the evidence of possible falsification of documents by the company & rdquor;; It also pointed out “internal control weaknesses & rdquor ;. The CNMV also demanded that EiDF publish the aspects included in the forensic report “without making clarifications, comments or additions from the company& rdquor ;. And, just in case, in that statement, the CNMV published the conclusions of the forensic report that in its opinion should be included. Among these, it was stated that the company’s founder, president and CEO, Fernando Romero, “participated first-hand in practically all of the company’s decisions& rdquor;; They linked him to the debtors and, in relation to this, “to invoices and payments for services that may not have been provided or not justified, as well as the falsification of documents & rdquor ;, among other matters.
Finally, the CNMV required EiDF to publish that “a new CEO will be hired& rdquor ;.
The company, in absentia
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The company’s response was, to say the least, unheard of. In a very harsh response, the company informed the CNMV “formally that The exhaustive formulas imposed in the requirement filed by the CNMV will not be published& rdquor;. A full-fledged declaration of war that admitted that the CNMV could “act in the way it deems appropriate & rdquor ;. A Securities Commission perplexed by the situation only comments that it is “analyzing everything & rdquor ;. EiDF added that “the legal conclusions reached in the report forensics of Deloitte have already been submitted to the opinion of a prestigious firm & rdquor; to determine if “it can give rise to the demand of responsibility to its authors & rdquor ;.
While the war continues its course, with the ball in the court of the CNMV, the future of the company and its shareholders is up in the air. From a miracle born in mud, one can become a miracle with feet of clay.