On Friday, June 7th, short seller, Aurelius Value, published a degrading report on Pareteum Corporation (NASDAQ:TEUM) with the title “Where Are The Customers?”. In the report, among many other claims, Aurelius Value said that Pareteum has a questionable value of its 36-months backlog (reaching $900 million) on the back of its customers for which Aurelius Value suspects being capable of paying disclosed contractual values. It also questions whether the company will be able to convert 100% its backlog to revenue at the contractual rates. One example of the issue in question is Pareteum’s announced contract deal with “Eyethu Mobile Network”, a South Africa-headquartered company, worth around $50 million. Aurelius Value wanted to further research this company, hence it went for a visit, allegedly discovering “a dilapidated shack and crumbling structures near a rural African village”.
Another important acquisition relates to Pareteum’s management team with Aurelius Value linking them to previous breakdowns and/or frauds. More specifically, the report states that biographies for CEO Hal Turner and TEUM’s COO avoid representing their head positions at Catcher Holdings, which ended up being an unprofitable stock, due to its connection with Barry Honig, an infamous stock operator who was charged with fraud by the Securities and Exchange Commission in October 2018. Aurelius Value finds “similarities between TEUM and the stock promotion at Catcher”, alluding that Pareteum’s investors could end up with nothing as Cathcer’s did.
Insider Monkey didn’t verify the accuracy of Aurelius Value’s report, hence in the interest of fair reporting we have reached out to Pareteum Corporation for a response to the claims, and we bring you its statement here:
“Dear Fellow Pareteum Shareholders,
I want to take a moment to thank all of you for your support as we drive Pareteum forward.
In recent days our share price has been negatively impacted by a coordinated attack by short sellers. We fully understand that short selling is legal and it is an important part of the capital markets. That said, certain short sellers have used questionable tactics, including leveraging the media to misrepresent facts and make anonymous spurious claims against the company and its officers.
Every one of us at Pareteum is fully dedicated to upholding the highest standards and reporting requirements of a public company. We categorically deny the allegations put forth. We do not intend to legitimize those reports by delving in to them.
Pareteum has experienced tremendous growth, and we continue to grow in a healthy and measurable way. We are confident in our strategy and mission – to connect every person and every(thing)™. Today millions of people and devices around the world are connected using Pareteum’s Global Cloud Communications Platform, enhancing their mobile experience. Every day more people and devices are being added to our platform.
We will not be distracted. We continue to focus on operating our business and generating strong financial results. We believe executing on this plan will ultimately create significant value for long term shareholders.
We will report our Q2 results in early August, and look forward to speaking with you then.
Again, I want to thank all of our shareholders for their continued support.
Sincerely,
Hal Turner
Chairman and Chief Executive Officer”
On the day the report was published (June 7th), Pareteum’s stock had a closing price of $2.58, dropping by 24.34% from one day earlier when it closed at $3.41. On a year-to-date basis, its stock actually gained 68% with its price being $2.94 at the time of writing this article, and $1.75 at the beginning of the year. Among the funds tracked by Insider Monkey Portolan Capital held the largest position in TEUM, worth more than $6 million, at the end of March. You can see the list of hedge funds with bullish TEUM positions here.
Disclosure: None.
This article is originally published at Insider Monkey.