Some 14 months after Gabriel Grego and his fund, Quintessential Capital Management (QCM), exposed the goings-on at troubled Greek jewelry maker and retailer Folli Follie, leading to the suspension of trading in the latter’s stock and hurting many investors and funds, the same fund is back in the spotlight, this time blowing the whistle on an Italian firm.
In a report Kathimerini has seen that will be published on Wednesday, QCM alleges that Bio-On SpA, a bioplastics company listed on London’s AIM submarket with a capitalization of 1.1 billion euros, sales of 50.7 million euros and operating profits of 42.3 million euros has “fabricated” its figures.
It goes on to predict that its stock price will soon crumble, leading to its delisting, and that there will soon be regulatory, civic and possible criminal procedures against what Grego names “the new Parmalat of Bologna”.
Bio-On “claims to sell licenses for a compound (PHA) which can be readily used for all sorts of applications to replace regular plastic. PHA [is supposedly] biodegradable in water, created from natural sources and suitable for industrial-scale production. The company boasts exploding revenue and profits and collaboration with several established companies,” notes the report.
However QCM argues that “most revenue and credit is fictitious,” Bio-On’s “assets are likely worthless” and its “technology is based on old, flawed science and poor economics.”
It goes on to allege that there are “glaring accounting irregularities,” that “expenses are grotesquely inflated” and that the Italian company is “led and advised by a team of questionable characters”.
QCM further claims to have found “evidence of suspicious transactions and of conflict of interest” and of “worrying credit health with high cash burn and high debt”.
“Bio-On looks like a scheme orchestrated by management to enrich themselves while deceiving investors,” argues QCM.
Grego says Bio-On operates in the following way: It approaches a company with which it sets up a joint venture. Bio-On then publishes the news speaking of major investments and ambitious sales targets, leading to a big boost to its stock. Then Bio-On sells the PHA license to the joint venture with a pay promise and records this revenues straightaway in its books, Grego argues, adding that the joint venture never actually gets to pay for the license, nor build any factory or sell any product. He notes that in the last seven years more than 20 such projects have been announced without any of them getting implemented.
The response to all this by Bio-On is eagerly anticipated.