The Quintessential Capital Management fund, whose managing partner Gabriel Grego was instrumental in revealing the true state of Greek jewelry company Folli Follie, has now claimed in a report that music streaming company Akazoo SA will be the next Greek enterprise to crumble. Akazoo, listed on the Nasdaq since last September, is accused of trying to profit at its shareholders’ expense.
QCM argues that Akazoo, which is domiciled in Luxembourg, pertains to be a successful multinational with revenues, earnings and users to rival industry giants Pandora and Tidal. However, QCM counters this may be just a “tiny loss-making company based in Greece” with a negligible user base and sales. It adds that Akazoo only has 26 employees.
In September 2019 Akazoo began trading on the Nasdaq through a reverse merger after being part of Greek company InternetQ, which was listed on the AIM market in London until 2016 when it was shut out of trading after claims of foul play. A few years later InternetQ span Akazoo off and began trading in the US through a reverse merger with a cash shell.
Akazoo, “a global, on-demand music streaming subscription company with a focus on emerging markets,” claims to have 44 million registered users, of whom 5.5 million are subscribers. It also says its revenues come to $140 million – growing 24 percent per year – and that it is active in 25 countries.
QCM alleges that Akazoo’s accounts “may in fact hide serious irregularities or worse.” It identifies discrepancies between earnings and cash flow, large investments in intellectual property and a very high accounts receivables balance, which is strongly reminiscent of Folli Follie’s case. Furthermore, the US hedge fund alleges that Akazoo has not paid any taxes in the last four years, despite the fact that it claims to have accounting profits of $21.7 million. The number of likes or followers on social media, as well as the ratio of revenues to employees also painted a strange picture, QCM added.
As a result of this report, that claimed the Greek company is a “castle of cards,” Akazoo’s stock tumbled in Monday’s Nasdaq trading.