Solutions 30’s stock craters after EY refuse to sign off on accounts

Holy moly . . . 

After under-siege French outsourcer Solutions 30 announced late on Friday that its auditor EY was “not in a position to express an opinion on its 2020 financial statements”, the company took the decision to publish its unaudited accounts on Sunday afternoon alongside EY’s audit opinion. And, it’s certainly not a happy state of affairs. (Full FT story here.)

Here’s the statement from EY in full, with our emphasis:

Basis for Disclaimer of Opinion

The Group did not provide us with access to certain information necessary to perform our audit. In this context, we have not been able to obtain sufficient and appropriate evidence supporting the nature, the substance, the value and the compliance with laws and regulations of certain transactions of the Group and to determine if these transactions were made with related parties including with members of Management. Moreover, the Group did not act on our request to perform additional procedures in relation with the investigation performed on behalf of the supervisory board.

We have not received from those in charge of the Group all the representations requested.

These matters led us to conclude that the possible effects on the consolidated financial statements of undetected misstatements may be both material and pervasive. As a result, we were unable to determine whether any adjustments might have been deemed necessary in respect of these consolidated financial statements of Solutions 30 SE as of 31 December 2020.

Blimey.

Solutions 30 said it strongly disagreed with EY as it “provided all the information that the group has at its disposal” and “EY was free to conduct any additional procedures . . . that it deemed necessary to express its opinion”. It also said that the related party transactions were disclosed in the annual report, and were carried out under “normal market conditions”.

Activist short seller Muddy Waters, who had been short the company since May 2019, responded to the weekend’s revelations Monday, taking time to not only criticise the company, but also the sell-side analysts and fund managers who had continued to support the stock throughout the past six months.

This Monday morning, however, a scathing note from a Californian short-seller might be the last of institutional money’s worries. After a two week hiatus, Solutions 30’s share price was down 66 per cent at €3.5, wiping out some €720m of market capitalisation.

Here’s the chart (via Google):

Related Links:
EY declines to sign off Solutions 30 accounts — FT
Solutions 30: suspended in animation — FT Alphaville
Oddo call for an independent audit at Solutions 30 — FT Alphaville
Solutions 30 suspends shares after Muddy Waters joins the fray — FT Alphaville
Solutions 30 falls a fifth on news of an unpublished short report — FT Alphaville
Solutions 30: a €1.1bn question mark — FT Alphaville
Solutions 30 and the disappearing audit letter — FT Alphaville