(Bloomberg) -- Aurelius Equity Opportunities shares plunged for a second day after executive rebuttals of Tuesday's allegations from short seller Gotham City Research failed to soothe wary investors.
Aurelius tumbled a record 35 percent to 35 euros in Frankfurt trading. The plunge follows a 17 percent decline yesterday after Gotham published a 68-page report questioning the company's accounting. The stock is worth no more than 8.50 euros, the short seller said yesterday.
Gotham said it was “unable to reconcile” anywhere from at least 43 percent to 100 percent of the company's reported earnings to the sum of its subsidiaries' earnings. Aurelius, a German firm that provides loans to distressed companies, said the short seller's claims are unfounded and that it is exploring legal action against the firm.
In its report, Gotham criticized, among other things, the sale by Aurelius executives of 169 million euros in shares in December 2016.
On a conference call Wednesday, Aurelius Chief Executive Officer Dirk Markus declined to comment on questions about executives' individual shareholdings, saying the company doesn't publish them and that management must respect so-called "quiet periods" included in German law.
Management share sales at the end of last year were correctly reported in the voting-rights statements, and managers have no intention of selling shares in the future, Markus said.
Aurelius's CEO said he will also further address all issues mentioned in the Gotham report in the near future. Still, Gotham's short attack looks set to continue. Gotham founder Daniel Yu said in an interview Wednesday that his firm will release another report about Aurelius within a week.
Gotham made another splash in 2014 with a report alleging fraud at Spanish Wi-Fi provider Let's Gowex. Gowex later filed for insolvency and its CEO resigned after admitting he reported false financial results for at least four years.
To contact the reporters on this story: Alexander Kell in Frankfurt at akell@bloomberg.net, Joshua Fineman in New York at jfineman@bloomberg.net, Trista Kelley in London at tkelley2@bloomberg.net.
To contact the editor responsible for this story: Scott Schnipper at sschnipper@bloomberg.net.
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