At dawn on Monday morning, FT Alphaville watched in disbelief at what had just crossed the French threads.
Solutions 30, a Luxembourgish man-in-a-van telecoms and energy subcontractor of 1.1 billion euros listed in France, had request Euronext Paris suspends its shares “until a new communication is published”. Four trading days later, equity remains frozen at € 10.38.
So what the hell is going on?
Well, as you may remember from our December coverage and what has happened since, the subcontractor, who counts heavyweights from European companies like EDF, Orange and Unitymedia among its customers, has endured six scorching months.
On December 9, news of an anonymous short seller report on the company hit the french press. Two days later, shares were temporarily suspended after Muddy Waters – the American activist investor, who had been in the short since May 2019 – joined the fray. The company responded in detail to the allegations, but that did not allay market concerns. By Christmas, the share price had halved to less than € 10.
Most of the anonymous report, and Muddy Waters’ five open follow-up letters through December and January, focused on the company’s historic relationship with an Italian accountant named Angelo Zito who, according to to local reports, spent time in prison in 2000 for his links to the Sicilian Mafia. Solutions 30 admitted she had a relationship with Zito, but said she cut ties with him in 2016 once they found out about his past last December.
Solutions 30, in an effort to clear his name, commissioned a Audit by Deloitte and the local accountant Didier Kling Expertise & Conseil at the end of January. Posted on April Fool’s Day, he ruled the various accusations against Solutions 30 “unfounded and erroneous” and declared that he had “not identified any evidence to corroborate the allegations of money laundering, in relation to organized crime”. Shares rose 30% on the news, settling at € 14, a third below the company’s 2020 high.
A sixth and seventh letter from Muddy Waters the following week caused the stock to drop again. This led to the publication of a long letter by Managing Director Gianbeppi Fortis on April 12, in which he declared that Solutions 30 had “decided not to respond publicly to completely unfounded slanders” and invited shareholders to file a complaint with the authorities against these “false and misleading publications”. The California-based activist responded with a YouTube video presenting his short thesis a fortnight later.
Phew. Now that you are in the know, here’s what FT Alphaville thinks could happen with the stock suspension.
The immediate thought that comes to mind is the annual results of Solutions 30. Just over two weeks ago, the company released its Numbers 2020 which at first glance looked pretty good. Revenue increased 18 percent year-over-year to 819 million euros, with EBITDA margins reaching 13 percent, and the company recorded a net cash buffer of 59 million euros. ‘euros. Not bad at all.
Still, there was a wrinkle: the results were unaudited. Solutions 30 auditor? EY. The company took over from Grant Thornton in 2019.
In the earnings press release, the company said “the full consolidated financial statements, including the notes, will be made available as soon as possible”. Silence followed.
This makes Solutions 30 the only company in the CAC 60 – French mid-cap index – not to publish audited full-year results, according to The French financial daily Les Echos. So here we have a company under scrutiny for its accounts audited by a company under scrutiny for its corporate disaster audits like Wirecard, NMC Health and Luckin ‘Coffee.
EY Luxembourg declined to comment, citing professional secrecy obligations.
French investment forums However, have one more suggestion: there may be imminent news from a key investor on the shareholder register, with the suspension extended due to details of the deal being corrected. The idea sort of adds up, Gianbeppi Fortis pitched it in his last letter, writing:
The duty of the company and its management is to examine all strategic options in the best interest of the company and its stakeholders. All options are being considered, including strengthening the company’s shareholding, which could go as far as delisting.
Still, this is where the logic breaks down somewhat: If a negotiation was underway – for a benchmark investor or for a full takeover – why wouldn’t Solutions 30 just issue a press release stating it. ? Under the rules of the AMF, the French regulator, discussions relating to a possible takeover must be communicated by the tenderer, unless the negotiations remain confidential. However, if the suspension of the action is a public signal that there is a negotiation, then that would nullify any confidentiality.
And, on the idea of an inbound anchor investor, even though a private negotiation for new capital was underway, how could the company justify a suspension of action on this news alone?
It doesn’t quite match.
Whatever the reason, Solutions 30 is silent. The company declined to comment for this article. However, it should be noted that there is no specific deadline for resuming listing, according to European and French regulations. The situation could therefore drag on forever.
However, the longer stocks remain frozen, the more suspicion could grow that the news is negative. Judging by the panicked discussions among online investors, fear already seems to be setting in.
Additional reporting by David Keohane
Oddo calls for an independent audit at Solutions 30 – FT Alphaville
Solutions 30 suspends actions after Muddy Waters joins fray – FT Alphaville
Solutions 30 drops fifth on news of short unpublished report – FT Alphaville
Solutions 30: a question mark of € 1.1 billion – FT Alphaville
Solutions 30 and the vanishing audit letter – FT Alphaville