Wednesday, September 17, 2014

The Missing Shoe CEO Story

This is one of those odd German business stories that pop up occasionally.

There's this successful sports shoe company in Germany....called Ultrasonic AG.  They are actually listed on the SDAX, and generally turn around 100-million Euro of sales per year.  They aren't big-big....but in the sports shoe industry....they are known around Germany.  Up until Friday, they were listed and selling on SDAX at around 6.50 Euro per share.

So, something came up and people were trying to contact the Chief Executive Officer (CEO) and the Chief Operations Officer (COO).  Both men are Chinese, but supervising and running the operation out of Cologne, Germany.

Neither guy can be found, period.

Then, the company officers started to track back on financial assets....discovering a fair amount of of it's cash in China and Hong gone.  They avoided discussing the actual amount, but someone noted that the company had procured a loan around thirty days ago in the amount of sixty million dollars.  So, logically, you'd assume that this sixty million is gone, and then whatever amount of capital that the company had in China.....probably a couple million minimum.....was the loot taken in this episode.

The stock fell on Monday, down to roughly 1.5 Euro (almost eighty percent drop).

Total failure?  Well....the CFO stood up and basically said that the company had around a million in capital that these two didn't take, and this million was enough to cover the immediate bills.

What happens now?  Stock-holders are going to be ballistic and demand a federal investigation in Germany.

The shoes themselves?  That's the odd thing.  The shoes sell well in Germany, and has taken up a big market in China itself (over 100 stores noted there).

The two guys?  Qingyong Wu (CEO) and Minghung Wu (COO)?  It's hard to say where they are hiding out.....likely some island resort in the Pacific, with no intention of going back to Europe or China.  But if you had sixty-odd million in your possession..... could you live a decent life while staying hidden?

The odd part to the story?  Ultrasonic Shoes were selling.  In 2012, they took 30.8 million Euro net income, and 2013....they took thirty-five million Euro.  Since 2009....every single year had shown growth and more potential.  The loan from August was supposed to help build up more production capability and probably would have shown another ten-to-twenty percent in net income over the next two years.

Course, this brings me around to the odd question.....was this figure of thirty-five million Euro for net income in 2013 correct?  Were bogus numbers being used for the past five years, and helped to ensure the sixty-million Euro loan, and this was all a game to trick a bank eventually into giving them cash for nothing?

The investigation by the German authorities?  I'm guessing they will put two or three people on it....dig for two weeks and admit there's simply no trail for the cash that disappeared or the two guys, and file it under "unsolvable".  And the two Chinese guys likely sit on a yacht parked in a bay around the isle of Tonga....sipping whisky and laughing over how the tennis shoe gimmick worked with those stupid bankers, and dimwitted German investors.

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