Adding insult to injury, Spanish Wi-Fi provider Let's Gowex announced Sunday that it is filing for bankruptcy amidst revelations that company accounts were falsified for at least the past four years.
In response, Gowex announced that it has hired PricewaterhouseCoopers to go through the company's financial records with a fine-tooth comb. The company has been a shining star in Europe and a public example of entrepreneurship in Spain. The self-proclaimed Wi-Fi-addicted company specializes in creating "wireless smart cities," a term that refers to free Wi-Fi services in urban areas. Gowex has started projects to bring free Wi-Fi to cities such as New York and Paris as well in its hometown Madrid.
"The Board, anticipating that the Company might not be in a position to face its ongoing debts when they become due, has agreed to file for a declaration of voluntary insolvency, without prejudice of other measure that it may adopt for the best protection of the Company's interests, regarding which it will immediately inform the market as soon as it might adopt them," the company said in a statement.
The company board also accepted the resignation of CEO Jenaro Garcia Martin Sunday after it came out that the founder of Gowex had been intentionally fixing the books. Gowex has yet to name a new president to run the company.
The series of events leading to Gowex's downfall began July 1, when Gotham City Research published a report detailing discrepancies in Gowex's finances. Turns out that records were inaccurate for the last four years, if not more. Garcia Martin and Gowex initially responded to Gotham City Research's report by calling it "categorically false." It didn't take long for the legal repercussions to catch up, however.
"I made the deposition and confession. I want to collaborate with the justice. I face the consequences," Garcia Martin wrote on Twitter Sunday.
The company has said that it is "in a state of complete shock" and are "considering taking legal action." Gowex also added that it is completely willing to cooperate with authorities.
As a result, Gowex's shares have plummeted and are making some investors antsy as evidenced by the drop in several companies' share prices in Madrid's MAB index where Gowex is located. Gowex alone lost more than $1 billion in value thanks to the Gotham City Research report. Europe has been enjoying success in the markets, but Gowex's plight highlights the fact that the market is overreaching.
"The underlying strength of Europe is not that robust," Piyush Gupta, CEO of DBS Group, said at a private banking event last week. "The markets are running ahead of themselves."
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