Detailed statement by AURELIUS Equity Opportunities SE & Co. KGaA in response to Gotham’s assertions


Detailed statement by AURELIUS Equity Opportunities SE & Co. KGaA in response to Gotham’s assertions

Grünwald, 2 April 2017

A. Preamble

In a paper published today, we will show in detail that the assertions made by Gotham Research LLC (“Gotham”) in its report (“Gotham Report”) published last week are substantially incorrect.

At the time the Gotham Report was published, Gotham held a significant short position in AURELIUS Equity Opportunity SE & Co. KGaA (“AURELIUS”). Gotham therefore had a vested interest in damaging the reputation of AURELIUS in order to depress its share price and make significant speculative gains to the detriment of all shareholders. Indeed, Gotham has since closed much of its short position and taken profits.

AURELIUS´ financial statements are accurate. The company’s governance structure and principles are sound. AURELIUS is a very healthy, stable and growing company, and has been since its foundation more than ten years ago. AURELIUS has a very solid balance sheet: as of December 31, 2016, AURELIUS has a strong capital base of 416.4m EUR in cash, equity of 486.5m EUR (equity ratio of 27%) and total assets of 1.8bn EUR. With a total of more than 21,000 employees, AURELIUS generated consolidated total revenues of 2.9bn EUR in financial year 2016. Furthermore, over the last five years AURELIUS has paid out 256.0m EUR via dividends and share buy-backs to its shareholders.

In its analysis, Gotham makes many fundamental intellectual mistakes: it compares apples with oranges, it confuses timelines, and it uses incomplete research to reach conclusions which are invariably inaccurate.

BaFin has initiated an investigation to assess whether market manipulation has occurred in connection with Gotham’s actions. AURELIUS fully supports BaFin's investigation and is currently evaluating all avenues to pursue legal action, including action under criminal law.

B. Executive Summary

Gotham’s report lists a number of assertions, all of which AURELIUS will disprove in this paper. We summarize our specific response to assertions on page 4 of Gotham’s document here:

  1. 100% of reported earnings and subsidiaries’ earnings can easily be reconciled by taking into consideration the differences between IFRS and local GAAP reporting. Gotham fails to do so.
  2. AURELIUS‘ accounts show all contingent liabilities. Gotham’s calculation of contingent liabilities double-counts and misqualifies.
  3. Negative goodwill, or bargain purchase, is an inherent, and legal, part of AURELIUS business model. IFRS 3 regulates how bargain purchase income has to be accounted for. AURELIUS meets all relevant reporting requirements in this regard.
  4. AURELIUS has acquired 77 businesses since 2006, only four of which (5.19%) went into insolvency while being part of AURELIUS-Group. This is a very small number considering AURELIUS’ strategy of acquiring distressed assets. Gotham’s calculation is far-fetched.
  5. AURELIUS’ NAV is fully justifiable and plausible. A simple calculation shows that the company’s implied NAV/EBITDA multiple is 8.9x, in line with the range for non-listed small and mid-sized companies in Europe of 7-10x. Gotham’s NAV derivation makes no sense.
  6. There is a good reason why AURELIUS has not received an unqualified audit opinion: its non-disclosure of individual asset acquisition prices. Such disclosure would leave the company at a disadvantage to its competitors. Gotham’s charge reveals a lack of understanding of our industry.
  7. AURELIUS does have an independent CFO: Steffen Schiefer has been in office as a member of the extended management board since 2012.
  8. Collectively, the AURELIUS Board members continue to own a significant share in the company. Its interests are fully aligned with those of shareholders.
  9. AURELIUS is not involved in more civil litigation than any other company of comparable size. It is not involved in any criminal litigation.

Further unfounded assertions made by Gotham in its report are also disproved in this response.

C. Corrective Statement

For the full statement please click here: