* Gowex fall raises worry over other Spanish investments
* Case questions quality of market supervision, transparency
* Peers seek exit from Spain's alternative market
* Foreign investors say to be cautious on Spanish stocks
By Julien Toyer
MADRID, July 7 The collapse on Sunday of
wireless provider Gowex could rattle investors'
confidence in Spain and its companies just as the country
emerges from the worst of a five-year slump and foreign money
starts to flow back into it.
Gowex said on Sunday it would file for bankruptcy and that
its CEO had resigned, after acknowledging it had reported false
accounts for at least the last four years.
The news, which stunned investors and workers, raised
questions not only about the quality of stock market supervision
but also about other companies which raised funds by listing on
the country's alternative market as they sought a substitute to
bank lending that dried up during the worst crisis in decades.
"(Gowex) is fuelling a lot of doubts and a lack of
confidence," said Nuria Alvarez, analyst at brokerage firm Renta
4. "It is generating a reputational damage."
The supervision of Spain's alternative stock exchange
Mercado Alternativo Bursatil (MAB), which was thrown into the
spotlight by the case, falls under the responsibility of both
the market operator Bolsas y Mercados Espanoles and the
bourse watchdog Comision Nacional del Mercado de Valores (CNMV).
The CNMV declined to comment on whether the case would
affect Spain's reputation among investors.
On Monday morning, four companies which are listed on the
MAB - Ibercom, Ebioss, Carbures and
Eurona - initiated proceedings to leave it and list on
Spain's main market as contagious concerns about Gowex sent
their own shares down between 15 percent and 20 percent.
The market operator BME itself was also under pressure, with
its shares losing 3.09 percent at 34.15 euros at around 1045 GMT
and tailing Spain's benchmark index Ibex.
"It's very sad because a lot of people have lost a lot of
money... This looks like a Spanish Madoff, scamming retail
investors and making them think they were something they
weren't," said Zaryn Dentzel, the American co-founder and CEO of
Spain-based social networking service Tuenti which was bought by
Telefonica in 2010.
"What Gowex has done is bad for the technology sector
because the main problem that European companies have is access
to liquidity and so markets like the MAB losing legitimacy is
the worst thing that can happen," he added, although he said
Spain was still a great place to invest.
No one from Gowex was immediately available to respond to
This is not the first time that a company listed on the MAB,
a stock market long considered by analysts as less transparent
as Spain's main stock exchange, has run into trouble.
Earlier this year, Zinkia, owner of children's TV
character Pocoyo and once another MAB success story, entered
administration, while wedding planner website Bodaclick
and plastic clinics group Suavitas have also filed for
Separately, MAB-listed advertising firm Nostrum and media
company Negocio were expelled from the stock exchange for not
abiding by its rules.
Until trading in its shares was suspended on Thursday, Gowex
had enjoyed an unequalled ride on the stock market.
Its shares jumped 2,200 percent from 1.2 euros each in July
2012 to a high of 26.34 euros in April 2014, as the company
enjoyed new contracts and the backing of well-known
In sharp contrast, the stock plunged 60 percent over two
days last week - wiping around 870 million euros ($1.2 billion)
off the company's market value - after a firm called Gotham City
Research alleged Gowex was misrepresenting its accounts.
It is not clear whether its ex-CEO and founder Jenaro Garcia
Martin still controls Gowex, which claims to be making money in
91 cities around the world from its free wi-fi platform, through
which it sells roaming, advertising and e-commerce services.
On its web page, the company says its main shareholders as
of Dec. 31, 2012 were the firm Cash Devices SL, owned by Garcia
Martin according to Spanish public filings, and Biotelgy VC SA,
a Luxembourg-based firm which Garcia Martin said it controlled
back in 2010.
But, according to Luxembourg filings obtained by Reuters,
Biotelgy was dissolved in 2012 because it had no assets.
According to recent public filings, other Gowex shareholders
included Lazard Asset Management, JPMorgan Asset Management,
Santander Asset management, The Vanguard Group or Allianz Global
Investors Europe, among many others.
Many of these shareholders may have now sold their stakes.
"We sold all the shares we were holding in Gowex on
Thursday. We had about 160,000 shares in the company. We lost
about 65 percent after selling shares at around 7.7 euros per
share. Gowex was about 0.5 percent of our fund," one of the top
10 Gowex shareholders told Reuters on condition of anonymity.
"We will take more care in buying other Spanish stocks from
According to Spanish shareholders association Asinver, about
5,000 small shareholders, seduced by the promise of an expanding
free wi-fi business and juicy returns, invested in Gowex and may
have lost money.
Earlier this week the Spanish market operator CNMV asked the
U.S. Securities and Exchange Commission (SEC) and the UK's
Financial Conduct Authority (FCA) to provide information about
Gotham in order to analyse whether the publication of its report
could constitute market abuse.
The CNMV also said it would investigate the functioning of
the MAB. The MAB said in a statement it had decided trading in
Gowex shares would remain suspended until further notice. It
said separately it had sent Gowex's Sunday announcement to the
CNMV as it may also constitute market abuse.
Gowex workers on Monday said in a statement they were "in
shock" and were looking at possible actions to take as victims
of this situation.
($1 = 0.7331 Euros)
(Additional reporting by Sarah Morris, Jesus Aguado, Jose Elias
Rodriguez and Andres Gonzalez in Madrid, Michelle Sinner in
Luxembourg and Atul Prakash in London; Editing by Sophie Walker)