Fear follows Gotham City as firm seeks more scalps

The spectre of short-selling yesterday loomed over small caps after Gotham City Research claimed victory over Spanish firm Let’s Gowex, the target of a devastating research note, and said it would continue to cast a critical eye on other firms.

Gowex has declared bankruptcy and revealed that its last four years of accounts had been falsified, with its chief executive apologising for all the company’s wrongdoing.

The admission followed a research note posted by Gotham that gave the Spanish-based public Wi-Fi provider a price target of zero, alleging that 90 per cent of Gowex’s reported sales were fraudulent.

In a statement posted on Gotham’s website yesterday, the controversial research group said the collapse of Gowex justified its methods and research.

Gotham also took the opportunity in its statement to renew its attack on Quindell, the last recipient of a hyper-critical research note before Gowex, as the American group alleged the London-listed firm’s rebuttal at the end of April of Gotham's claims was “full of lies”.

Quindell was hit in mid-April by Gotham’s scathing research note, which knocked nearly £1bn off its valuation as its share price fell by over 50 per cent. However, Quindell res­ponded with a detailed rebuttal and announced it would take legal action against Gotham and refer it to the Financial Conduct Authority.

Yesterday, Quindell did not respond to the latest critical outburst from Gotham, but sources close to the company said it stood by its rebuttal and regarded the controversial attacks to be defamatory and part of a calculated short-selling strategy against Quindell.

Gotham has been behind a string of hugely damaging attacks on a range of small-cap companies since last year that has badly damaged their share prices, with targets including US- based firms Ebix, Blucora and Tile Shop, as well as its most recent attacks on Quindell and Gowex.

Gotham has been open about its support for short-selling, stating in its most recent research note that, “you should assume that as of the publication date of this report, Gotham City Research stands to profit in the event the issuer’s stock declines”.

■ Gotham City Research LLP was founded in 2013, registered in Delaware.
■ Founded by Daniel Yu, a private activist investor known for taking short positions.
■ It posted its first research report in February of 2013, targeting US firm Ebix.
■ It is secretive and is unwilling to reveal details such as its number of employees.

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