March 28, 2017
Gotham City Research LLC
GOTHAM CITY RESEARCH’S OPINIONS:
Aurelius’ shares are worth no more than €8.56 per share, implying at least -88% downside to its current share price.
Aurelius may face similar scrutiny as Philip Green did in the UK, who was accused of systematically plundering BHS.
SUMMARY OF FINDINGS:
We were unable to reconcile 43% – 100%+ of Aurelius’s reported earnings to the sum of its subsidiaries’ earnings.
2015 contingent liabilities, as calculated by the sum of its parts, seem understated by 46% or more.
Aurelius’ income from negative goodwill accounts for over 120% of 2011-2015 earnings.
Similarly high levels of negative goodwill preceded a permanent -95%+ collapse in the share price of Arques AG, whose business model seems identical to Aurelius’.
Aurelius claims to be a “good home for companies” yet nearly 60% of portfolio companies entered insolvency after Aurelius sold them, per our review.
Our estimate of NAV is 80%-90% lower than Aurelius’ unaudited and DCF-based NAV.
Aurelius has never received an unqualified audit opinion on its audited financial statements.
CEO Dirk Markus, a former Finance executive of Arques is also the CFO of Aurelius, according to Hauck & Aufhauser.
Aurelius’ executives sold €169 million of shares in December 2016 (40% or more their stake) at €52.5 per share. The prevailing market price was €59 that day.
Aurelius has been accused of illegal conveyance (and found guilty in some cases) in its business dealings (Einhorn case, EDS case).
Aurelius “abstains” from providing negative goodwill-related disclosures “because it believes that they can lead to economic disadvantages.”