Free Wi-Fi Supplier, Gowex, Files For Bankruptcy

PuceBaboon writes "The BBC is reporting that a Spanish firm, Gowex, which provides free Wi-Fi services in major cities world-wide, has filed for bankruptcy, following revelations that financial accounts filed over the past four years were "false". The company supplies services in London, Shanghai, New York and Buenos Aires, as well as Madrid. Other sources report that up to 90% of the company's reported revenue came from "undisclosed related parties" (in other words, from Gowex itself) and that the value of the company's share price was now effectively zero.

Comments

"Fake it till you make it"

[Anonymous Coward]

That's what people are told when they want to build a startup. It is legendary that a famous auction site started with an inventory of items that had been highly inflated by employees. Giving new customers a free ride while pretending that they're full paying customers to others seems to be a common strategy. So what do you expect to happen when you "don't make it"? This happens.

Nothing unusual

[ledow]

This isn't at all unusual. However, what really gets my goat is how were they allowed to do what they did for four years?

That's four years of some accountant falsifying accounts. Four years of tax not paid or properly checked (if they were earning what they claim, a lot of tax would be due - if they were lying about it, they'd not want to pay that tax). Four years of operating without anyone questioning.

And, most importantly I feel, what's happened to the directors and accountants of the company now ( I highly doubt just one person was in knowledge of this)? My guess is that they've already fled with a nice bundle somewhere.

Happened like mad to the software houses in the 80's, still going on. Why is it compulsory that I have to be sat down like a child when I want to take out a £1000 loan but nobody questions businesses or enforces them to give enhanced accounts or audits in their first few years of operation. It would stop an awful lot of such outright fraud as this if someone from government was poking through their accounts, and they wouldn't even be able to set up a "new" company, transfer the assets and then declare bankruptcy as is also common.

Re:Nothing unusual

[FireFury03]

Why is it compulsory that I have to be sat down like a child when I want to take out a £1000 loan but nobody questions businesses or enforces them to give enhanced accounts or audits in their first few years of operation.

Well, to some extent I think people who run businesses are probably expected to have a bit more of a clue to managing finances than the average man-on-the-street. (And I guess you only have to look at the number of "pay day loan" companies that charge several thousands percent APR to realise that there are a *lot* of members of the public who really don't understand how to manage their finances). So the whole being sat down like a child thing is basically to stop people who don't know what they're doing ending up with mountains of debt _by mistake_, it's not to stop people intentionally cooking the books.

A company cooking the books is serious, but arguably, a privately held company cooking the books is probably not _that_ bad - yes they avoid paying a bit of tax, but auditing costs the government money so you have to weigh up this cost against the amount of extra tax revenues they're going to get (and certainly, my privately held limited company has never been audited by the inland revenue, not that I have any reason to believe that such an audit would raise any warnings).

Things are a bit more serious with a publicly held company though, since cooking the books will artificially raise the share price and then risk a crash (as has happened here) so innocent third party investors are going to get screwed over. Its hard to decide who should be paying the costs of an independent audit in this case though. Maybe investors should value a company's shares more highly if a independent audit has been published for that company since investing in that company should presumably be a lower risk.

Could be NSA

[penguinoid]

Other sources report that up to 90% of the company's reported revenue came from "undisclosed related parties" (in other words, from Gowex itself)

I hear the NSA likes to invest in internet infrastructure and technology, and not even take the credit. Maybe they're the undisclosed party.

From businesses who needed free internet around em

[mimino]

Imagine you're a coffee shop and you want to provide free wifi for your customers. Some businesses buy equipment and the internet connection and hire an IT guy to hook it all up together. This all costs.

Now imagine a company like Gowex comes and tells that they could do it all for you, all you need to do is pay them installation and monthly fees. They tell you they are professionals and they will handle everything - from simply configuring and maintaining everything including repairs; to handling all the scary stories they'll tell you about viruses, hackers, police enquires and so on. You, as a business owner will likely accept some 100-200-500 eur monthly fees to not to have to worry about all this IT stuff.

Gotham City Research LLC's Report on Gowex

[McGruber]

The broker's report that exposed the fraud is worth reading: Gotham City Research LLC's Report on Gowex: Let’s Gowex: La Charada Pescanova (a Pescanovan Charade)

The report includes this tidbit:

CEO Jenaro Garcia was a Director of Advanced Refractive Technologies, a penny stock fraud whose shares were revoked by the US Securities and Exchange Commission.

Fraud!

[Anonymous Coward]

It's a $1 billion stock fraud.

Gowex claimed 100k Wifi hotspots, selling advertising to the users, and collecting fees to provide the wifi on behalf of cities.
Gowex biggest declared income comes from another company.
Gowex's biggest supplier is that other company, so the money is being cycled.
Other company is connected to Gowex management, so indicator of fraud.

I lost some money in their stock, only a few $$$ thousand. I read the report 15 hours late, share price had already dropped to 10. I did a quick sanity check on Gowex website, looked at their map, saw Barcelona hotspots, there were only a few, only 1 in Taragona. I saw 'Burger King' was one of their hotspots in Barcelona, this is supposed to be their home country FFS. How many times have you see people used free wifi in a burger place? How many adverts do they click on? If the wifi has a range of 30 metres how many people does that reach? So 1 hotspot in Taragona on the map, and only 30 metre circle covered??? No way. It wouldn't even be worth sending out a repairman.

If you wanted roaming access, you wouldn't use wifi these days you'd use 3G or 4G.

I decided this was in no way a billion dollar company, and sold out immediately. Kicked myself for not digging deeper into them before this report.

Sorry, but company is worthless, and not 10% of the revenue, it's completely worthless. There's no way to make a profit with a spread of equipment so thin, that it could never be maintained.

But, But, But

[Anonymous Coward]

It was FREE! How can this happen? Not enough volume?

Re:How was this to work ?

[Immerman]

>Also, the only place to reasonably deliver advertising is on the landing page, once you pass this, there is really no way to deliver advertising in an efficient manner.

Come now - there's always the page of ads randomly inserted as a response to every tenth HTTP request. Wildly popular among users and generates much good will for the companies advertising.