The Galician company specialized in the installation of solar panels for photovoltaic self-consumption is being, much to its regret, the protagonist of the summer. A little over a week ago, the National Securities Market Commission (CNMV) released a forensic report from the Deloitte auditor that pointed to possible documentary and accounting falsehoods by its management leadership.
The news scared away its investors and when the markets regulator allowed the company to return to trading, after four months of suspension, a sales debacle broke out that in less than 48 hours caused 1,496 million euros to disappear. . An amount with which the Meliá hotel group, listed on the Ibex 35, could be acquired in one go, and there would be money left over.
To understand why all this has happened, you have to start by knowing.
The company was founded in 2008 in Pontevedra by Fernando Romero, a young man born in the Basque Country but settled in Galicia since childhood. His beginnings were not easy. It did not carry out the first self-consumption installation until 2011 and it was not until 2018, with the arrival of the PSOE in the Government and the suspension of the so-called “sun tax” that taxed self-consumption facilities until making them unfeasible, when EiDF stood out.
Since then, theirs has been an American-style success story. Romero, currently owner of 72% of the capital, was an entrepreneur who, from nothing, had managed to enter, in 2021, the top ten of the Forbes list of the richest in Spain.
As stated, EiDF's foray into the market had been going on for years. So it was perfectly positioned in the market when the self-consumption boom started in Spain. The pandemic first and the energy crisis unleashed in 2021 have caused both homes and companies to skyrocket the demand for photovoltaic panels for self-consumption.
This skyrocketed EiDF's business. In July 2021 it began trading on BME Growth, the Spanish market for medium-sized companies. That day the shares marked a price of 4.2 euros. Which meant valuing the company at 57 million euros. On April 14, 2023, the day the National Securities Market Commission (CNMV) suspended its listing, it was worth 29.76 euros. In April, it was one of the stars of BME Growth and aimed to be the next company to make the leap to the continuous market. It was worth more than companies like NH hotles, Meliá or Prosegur, among others. It was this possible change that led EiDF to change its usual auditor, Crowe Auditores, for one of the Big Four, PwC.
Like all listed companies, EiDF was required to submit its accounts to the market in March. But in March 2023 the company breached that obligation. The market regulator, the CNMV, urged it to do so, but the company was unable to do so because its new auditor, PwC, refused to sign off on detecting irregularities.
Faced with this situation, the CNMV suspends the company's stock listing as it understands that investors do not have sufficient information about its financial status. That was on April 14, 2023 when EiDF was trading at 29.76 and a market capitalization of 1,721 million.
The EiDF itself hired another auditor, Deloitte, to carry out a forensic report in order to clarify the real situation of the company's finances. It is, as its technical name can show, a kind of autopsy of the company. That is, the auditor receives all the necessary permissions to investigate whether the official accounts correspond to reality. She analyzes bank accounts, all kinds of financial procedures, including emails from managers and employees.
In line with PwC's suspicions, the Deloitte report uncovers irregularities in the management of the company by Fernando Romero and the rest of the management team. According to the information published by the CNMV last week, there are indications of “Indications of falsification of documents related to invoices, works or deliveries of materials that directly affect the group's financial statements.”
The report also detected that three of the four partners of the company analyzed may have participated in "falsification of contracts and documents by those responsible for the company in order to justify the lack of control" over the situation of the company.
There are even alleged invoices for materials for works that had not obtained administrative construction authorization. Without this permission "the execution phase could not be started, which is when it is possible to proceed with the delivery of materials," says the report.
There are also discrepancies between the costs recorded in accounting and the actual degree of progress of the works, possible contractual breaches and "not truthful or inconsistent" documentation.
Beyond the obligation to transfer all these doubts to the market, it also demands that EiDF reorganize the management leadership within a maximum period of six months. Which means changing the CEO and founder Fernando Romero and the main executives of the company.
Once the CNMV forces EiDF to publish both the 2022 accounts and the conclusions of the Deloitte report, it considers that the market already has real information on the EiDF's situation and therefore lifts the veto to list. So he decides that that day is Monday, August 28.
In the stock market there is no worse enemy than distrust. Given the doubts about falsifying documents by the company's management leadership and after more than four months trapped in the value, the desire to escape is translated into an avalanche of sales orders. Until then more than 160,000 orders entered the system and crashed it. BME had to expand the loss range of 50% initially established to 70%. Despite this, only 34,827 shares found a buyer that first day. The rest were queued for Tuesday. On days the losses exceed 87%. EiDF has gone from a market capitalization of 1,721 million, on April 14, to just over 225 million at the close of yesterday, Tuesday.
The EiDF situation is very complicated. In the stock market, this Wednesday the trend seems to have changed and at 10.30 in the morning the value rises 14% to 4.6 euros per share. Even so, it seems difficult for him to return to the level with which he started on Monday.
On a financial level, the impact is even more difficult to overcome. The company has already announced an ERE to lay off 20% of the hundred workers that it still maintains. And it must face a financial restructuring based on the irregularities detected.
The CNMV has demanded the departure of the management team, including its founder and CEO, Fernando Romero. A process that the EiDF assures is open, but has not materialized yet.
