Gowex, a Madrid-based Wi-Fi provider that launched its free ad-supported service in Chicago less than two months ago, is filing for bankruptcy amid a financial scandal.
Jenaro Garcia, founder and CEO of Gowex, resigned this week after admitting he inflated revenues at the publicly-traded Spanish company. He posted several tweets on July 6 accepting responsibility and apologizing.
“I’m asking everyone for forgiveness,” Garcia tweeted in Spanish. “I'm sorry with all my heart.”
Started in 1999, Gowex is Spain’s largest pure-play Wi-Fi company. Gowex continues to operate in Chicago and other markets, but its stated plans to expand into 600 cities worldwide by 2018 are likely up in the air in the wake of the scandal. Its market value grew 22 fold in the last two years, according to Reuters.
The financial fraud came to light July 1 when New York-based investment firm Gotham City Research published a scathing 93-page report alleging that more than 90 percent of reported Gowex revenues “do not exist,” and putting a $0 price target on its stock.
Gowex, which is listed on France's Alternext, said it had revenue of about $249 million in 2013, up 60 percent year-over-year, according to executives. Gotham pegged the revenue at just over $11 million.
Garcia, whose stated vision for the company was that Wi-Fi should be as available as water, came clean on his Twitter account @jero_net:
“I made the deposition and confession,” Garcia tweeted in English. “ I want to collaborate with the justice. I face the (consequences).”
On its website, Gotham, which focuses on “due diligence-based, special situation investing,” says it may have long or short equity positions in the companies covered. It also posted a response to Garcia’s “swift admission of guilt,” saying it saved them “a great deal of time,” as they were preparing a second report in case the company was going to “continue its charade.”
A statement from Gowex workers dated July 7 dissociated employees from the financial scandal and said they were considering legal action, even as they vowed to keep the company operating for its customers.
“We are in a state of complete shock,” the workers’ letter said. “Workers still continue in our work posts, to keep providing service and to bring the company forward, despite the circumstances.”
Gowex made its first foray into the U.S. in March 2013, launching in New York. It has since expanded to San Francisco and Miami, and made Chicago the fourth U.S. city to offer the service in May.
The Chicago service employs 450 access points on buildings throughout the downtown and North Side, according to executives, although Gotham said the size of the company’s hot spot network was also dramatically overstated.
A walk on the Near North Side Thursday showed the Gowex network was still available.
Reached by phone Thursday, Carlos Pujol, who joined the company in May as the New York-based CEO of Gowex North America, said he resigned this week.
“As soon as I saw that something has been done that was wrong, I immediately quit,” Pujol said. “I resigned on Monday.”
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