Globo plc is no stranger to attracting skeptical short-seller attention. Like many other companies with a complex org chart, no cash flow (ever, in its history), a shady appearance in the public markets (the company emerged on London's AIM exchange aimed at "smaller, growing companies" as a reverse merger), a track record of equity-funded rollups, a penchant for raising both debt and equity capital, the software maker has regularly been fodder for short sellers over the years, such as Ennismore Fund Management which in January of 2014 published a report revealing its short position on the basis of the following: Globo is a Greek software company with two main product categories: text-based services that make web content such as social networks available for feature phone users, and a remote access product that employees can operate using their own personal smartphone or tablet (in the first half of 2013 these two products accounted for nearly 90% of Globo’s revenue). As at 21st January 2014 the company has a market capitalisation of GBP 267m despite never generating positive free cash flow after nearly a decade of publically reporting its financial statements. Future growth is expected to come mostly from the second of Globo’s products – GO!Enterprise - which is an app that allows a company’s employees secure remote access to work servers from their own personal mobile device, which the company describes as “ideally suited for the implementation of Bring Your Own Device (BYOD) mobility strategies”. According to the 2013 interim results statement, Globo management “believe that GO!Enterprise revenues will soon become the most significant part of Group revenue”. We have a number of concerns about this product and the level of revenue reported for it that have led us to conclude that this valuation is not justifiable and the funds that we manage are short the stock. Following the report, Globo's stock initially dipped, but after several denials by management promptly regained its previous highs. Then not much changed, with the stock trading at or above 40p for a long time... ... until last week when another hedge fund, this time Quintessential Capital Management issued the latest 39-page report slamming Globo with the simple enough title: "Our Final Opinion: It’s a Greek Parmalat" in which it basically said the company was nothing more than a cook-booking fraud: In a nutshell, we are of the view that Globo Plc is massively overstating its revenue and profit by generating fictitious sales invoices from shell companies created and controlled by Globo to pose as legitimate clients. In order to justify the resulting cash shortfall, other shell companies pose as suppliers to Globo and generate fictitious expenses, part of which are then capitalized. The results of our investigation suggest that the Company relies on its fabricated financial statements to issue shares and to secure credit to cover its ongoing expenses and to finance the acquisition of legitimate businesses, in the hope of diluting the "fraudulent" part of its business and eventually listing itself on the NASDAQ. While a minor portion of its business is authentic, the results of our investigation strongly suggest that at least 60% of Globo’s turnover is fabricated. The Company’s alleged activities, in our view, suggest possible criminal behavior and to cause its total demise if exposed. While the rest of the report is self-explanatory - it's a fraud - the following perusal of the company's, and especially that of its Greek CEO Costis Papadimitrakopoulos (whose linked in profile has now been deleted), history should have been sufficient to raise loud, red flags for pretty much anyone. Costis Papadimitrakopoulos founded Globo Plc in 1997 out of a small office in Athens, Greece. Costis has followed an unconventional career path for a tech entrepreneur. Costis initiated his career as a professional windsurfer. He then joined his family business, a food processing company. This experience apparently involved plenty of travel abroad, especially in Eastern Europe, where Costis claimed he formed many business contacts which, as we will see later, might play a part in the subsequent Globo affair. Following his family business experience, he then completed a degree in Electrical Engineering and subsequently started Globo. According to our research, in 2007 Globo went public not through a customary IPO, but by way of a reverse merger with an Israeli shell company. While a legitimate instrument, reverse mergers have historically been used by numerous fraudulent companies to float their shares and their reputation is doubtful, since they allow a company to go public while avoiding the scrutiny and due diligence typical of an IPO. Over the years Globo showed an impressive sequence of increasing sales and profits (albeit with increasingly negative free cash flows) and was active in M&A transactions, both as a buyer and as a seller. In 2013 and 2014 it acquired Notify and Sourcebits, two California-based mobile software companies for $5m and $12m respectively. Each transaction was performed at a valuation of 1x sales so Globo acquired $17m worth of sales. In 2012, Globo sold 51% worth of Globo Technologies (GT), a subsidiary engaging in software development and distribution, to Globo’s management. Although the consideration was about $15m, the terms of payment were unusual and one of the net effects of the disposal was to effectively decrease the amount of trade receivable on Globo’s balance sheet. This is because at less than 50% GT assets, including receivables, get consolidated and treated as a long-term investment. Following its US acquisitions, Globo’s CEO has moved to Palo Alto in order to lead Globo’s expansion in the United States, although the company’s headquarters remain in Athens. In June 2015 Globo attempted to raise $180m on the high yield bond market.6 The move raised many eyebrows in the investment community7 since these bonds would be issued at a very high interest rate. According to its financial statements, Globo sits on $104 of cash (though most of it held in banks with speculative credit ratings) and it is unclear why it would be willing to pay a 8%+ interest rate while having cash sitting unused in the bank. The bond issue was first reduced to $120m and then suspended altogether because it failed to generate sufficient interest from perspective buyers. According to our research, prior to their attempt to issue junk debt, Globo tried unsuccessfully to raise a senior secured loan of $120m from a large global investment management firm. The apparent inability of Globo to pass serious creditor due diligence lately should be seen with concern. It should have been but it wasn't. When the report emerged Globo's CEO promptly refuted "all allegations" made in the report, and requested its shares be suspended from trading in order to give it more time to provide a more detailed response. Only this time, the CEO's denial failed, and we were surprised to read this morning that following a Saturday board meeting of the U.K.-based software maker Saturday, CEO Costis Papadimitrakopoulos and CFO Dimitris Gryparis told the board admitted "the falsification of data and the misrepresentation" of Globo’s financial information. In other words, the CEO and CFO both admitted that not only had they been falsifying data, but that the company was a pure fraud as so many short sellers had claimed in the past. Then they promptly resigned. Chief Operating Officer Gerasimos Bonanos was also suspended, as the company - now without any leadership - "investigates further" it said Monday in a statement. Globo told its lawyers to report the matter to authorities and its principle bankers. However, we wouldn't hold our breath for the company to announce that upon further inquiry, not only does it have no assets left, but its chief executives were using it as a fraudulent shield from which to steal with impunity. And while Global’s stock was suspended last week after the Quintessential report (at a price of 28.25 pence valuing it at GDP106 million) we were even more surprised to learn that while the CEO felt the noose getting tigher, he was busy selling stock. According to Alliance News:"Globo also said that Papadimitrakopoulos had informed the company that up to last Thursday he has sold 42.05 million shares in the company, and pledged 10 million shares under a personal loan agreement with Lantau Holdings Ltd - a loan that will default at close of business Monday due to two consecutive days of the suspension of the company's shares from trading." At Globo's last quoted price before suspension of 29.45 pence, the share sale would amount to GBP11.9 million. This means Papadimitrakopoulos' holding in the company has been reduced from 18.67%, or 69.78 million shares, to 7.42%, or 27.73 million shares. Globo noted that it has requested additional details about these dealings, and does not yet "possess all relevant information about their timing and nature." It will make a further announcement once this information is received. Prior to the share suspension, Globo had a market capitalisation of GBP105.6 million. It is very likely that Papadimitrakopoulos is long gone, and is now to be found - or rather not found - in some quiet, non-extradition country, as this latest episode of truly hilarious corporate fraud concludes. As for shareholders who suddenly have absolutely nothing, maybe they can address their complaints to the regulators or the auditors who allowed this fraud to continue for years, or perhaps to Globo's corporate broker, Canaccord Genuity, which moments ago also resigned with immediate effect, effectively admitting it never did any underwriter due diligence on the company for the duration of its paid tenure. No matter who they appeal to though, one thing is certain: their money is forever gone, in this latest example of corporate greed gone absolutely wild.