What is the Adler group?
It is one of the largest real estate groups listed on the German Stock Exchange in Frankfurt. The company is already based in Luxembourg and has specialized in creating apartments in the 7 largest German cities in Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf. It was created only in 2020 from the merger of Luxembourg company ADO Properties and the Adler Real Estate and Consus Real Estate groups in Berlin. The portfolio was previously 80,000 apartments, but has now shrunk to 30,000 properties during the crisis.
Why is the Adler group in crisis?
Last October, a report by Britain’s Fraser Bering rocked the global stock market. Perring is a well-known short seller from the UK who prefers to bet on corporate dips with his company Viceroy. He succinctly explained in his report that the Adler Group had overvalued its properties through fictitious transactions with subsidiaries. This enables it to issue corporate bonds cheaply and at low interest rates in order to make money. To ensure that the Adler group does not become overburdened with debt, these bonds contain a provision under which the group’s debt may not exceed 60 percent of the real estate value of the Adler portfolio. Behring has now explained that Adler had artificially lowered that value to 54.7 percent through false valuations and fake transactions, but in reality it was between 72 and 87 percent. If true, Adler would have to repay the bonds immediately, which could cause great difficulties for the company.
That was half a year ago, what’s going on now?
Viceroy’s report already caused the value of Adler’s shares to plummet about 40 percent in October. Even if the group denied all the allegations, the board of directors commissioned KPMG auditors to conduct a special audit. KPMG submitted its final report on April 21. He states that no signs of systematic fraud were found, but some shortcomings in the way the transactions were executed.
The Adler group saw this as a confirmation of their position, but a week later the hammer came. KPMG declined to certify the 2021 Annual Report. This has nothing to do with the special test. Auditors say that they cannot unequivocally confirm the correctness of the information contained in the annual report. They justify this by saying that Adler did not allow access to certain information. That’s a harsh accusation that caused the stock to drop another 40 percent. So since October, Adler investors have lost 72 percent of their investment.
So Adler is now heavily in debt or not?
It is not yet clear whether Bering’s comments are correct. What is certain, however, is that the Adler Group has high debt. The unaudited annual report shows a minus of 1.2 billion euros for 2021. In order to reduce debt, Adler sold most of his apartments. Giant Dax Phonofia
Adler also lent the money through a stake and loans. In 2022, Adler sales are expected to nearly halve.
Something like that has to have personal consequences, right?
“We restarted the group on May 1st,” said Adler Chairman Stefan Kirsten. He himself has only been in office since February. In response to KPMG’s refusal to ratify, four of the eight board members were forced to resign. CEOs Maximilian Renecker and Terry Bodemoulin must remain until the annual general meeting in June at the latest. The supervisory board is also examining legal actions against both.
Isn’t there a supervisory authority investigating such a thing?
indeed. The Federal Financial Supervisory Authority (BaFin) has launched investigations that are still ongoing after the special report issued by KPMG. The authority says it has been scrutinizing the group since August. But nothing has happened yet.
An investor report, a refusal to testify, a fall in the price…sounds familiar to me…
Indeed, the course of the Adler tragedy is strikingly reminiscent of the case of Wirecard two years ago. Also at that time, Fraser Behring and the Financial Times got the ball rolling with a string of reports of irregularities in the group. Also at that time, the refusal to certify, at the time of EY, led to the payment service provider’s eventual demise. At that time, its share price had fallen to 0, and the company was bankrupt.
And then, as now, the individuals are said to have enriched themselves in the group. In Wirecard was manager Jean Marsalek, who was still on the run. In Adler, a group of investors led by Austrian Cevdet Caner was said to have moved money from the Adler Group into their own pockets. Kanner was only acquitted in 2020 by a Vienna court of money laundering, fraud and organized crime charges in connection with the collapse of his Level 1 real estate group ten years earlier. Perring believes that he and his friends control the Adler Group.
A 72 percent drop in price: What can I do as an investor?
First of all, investors do not have much opportunity to do anything against lower prices. As long as no criminal misconduct can be demonstrated against any Adler employee, especially the board of directors, the low price at Adler must be treated like any other employee. As an investor, this means that you should think carefully about whether you still trust the company to turn things around. If not, sell your stock instead of waiting for it to drop further.
From a legal point of view, it becomes interesting only when it can be proven that the Adler managers had not only poor management, but also their misconduct. Whether you are entitled to compensation depends on when you purchased your Adler stock.
All you need to know about your pension
The FOCUS Online guide answers all the important questions about pensions in 135 pages. Plus 65 pages of templates.
This is the case if you bought Adler stock during the so-called misinformation phase. This is the stage when management has already known of the relevant negative information but has not shared it. The law assumes that you would not have bought your stock if you had this information. You can then file a claim for damages accordingly. Your claims may also extend to auditors or individuals from the company, provided they are shown to be partially to blame. However, it is not yet certain whether this period of disinformation existed, and if so, how long to how long it lasted.
Even this damages but the court
Ho, it may take time. The fraudulent Wirecard shareholders haven’t seen any money after two years.
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