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Tecnoglass (TGLS) down 45% on short-seller’s report

By Robert Davis

16:49, 9 December 2021

New construction of high-rise buildings
Research report claims 'accounting irregularities' and other 'red flags' – Photo: Shutterstock

Stock in architectural glassmaker Tecnoglass fell more than 45% Thursday, reaching as low as $18.10 per share, after a short-seller claimed it had found evidence of “accounting irregularities” and “related party transactions” involving the Barranquilla, Colombia-based company’s 2013 public launch, which was effected through a merger with Andina Acquisition, a special purpose acquisition company (SPAC).

The report by Hindenburg Research, an international forensic financial research firm founded by activist short seller Nate Anderson, also alleges that Tecnoglass has ties to the Cali drug cartel that operates out of Columbia and set up more than 350 shell companies to influence local Chamber of Commerce elections.

Short sellers are investors who seek to profit from stock declines. Hindenburg disclosed that is has taken a short position in shares of Tecnoglass and “stands to realise significant gains in the event that the price of any stock covered herein declines.”

The firm did not immediately respond to a phone call and email requesting a response to the report. 

Despite Thursday’s drop, the stock is up more than 190% this year, driven primarily by demand from US housing construction.

‘Undisclosed third-party transactions’

Hindenburg said the report is the result of a months-long investigation into Tecnoglass that included reviewing decades of US and Colombian court records, securities filings, corporate registrations, property records, export records and media reports.

Some of the “serious red flags regarding management and numerous undisclosed related party transactions” that the report mentions go back as far as 1996.

That year, US criminal prosecutors alleged that the current chief executive and chief operating officer, brothers Jose and Christian Daes, were working as “managers” in the Cali Cartel. The complaint, according to Hindenburg, alleges the pair smuggled 200 tons of cocaine and laundering money for the cartel. Hindenburg said US prosecutors issued a warrant for Jose and later declared him a fugitive.

Three years later, the duo were brought up on check fraud charges after Colombian prosecutors alleged the men were in possession of checks paid to a Tecnoglass subsidiary by front companies allegedly controlled by the head of the Cali cartel, Hindenburg claims.


239.02 Price
+1.900% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 0.14


147.02 Price
+0.760% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 0.14


15.36 Price
+5.850% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 0.16


134.12 Price
+7.790% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 0.25
“All told, we have no faith in the company’s financials given management’s background and the irregularities we have uncovered.”
by Hindenburg Research commenting on Tecnglass

Accounting irregularities

The report also mentions several “accounting irregularities” that stem from Tecnoglass’ public debut in 2013.

For example, the report mentions a company called GM&P that was one of Tecnoglass’ biggest customers between 2013 and 2016, accounting for up to 26% of its sales in some years.

When Tecnoglass acquired the business in 2017, it purchased a 60% stake in the company without disclosing who was purchasing the remainder, according to Hindenburg. Since then, the report says shipments between the two entities have “exploded,” totalling more than $73m in 2020 compared to approximately $1.5m in 2017.

Hindenburg claims GM&P’s chief financial officer is a cousin of the Daes brothers. “We found no disclosure of the familial relationship.”

The report further asserts a subsidiary of this customer was managed by the nephews of the Daes brothers via an entity based out of Tecnoglass’ address: “The nephews were, and still are, both senior employees of Tecnoglass.”

“Given the above, we strongly suspect Tecnoglass has faked a significant portion of its revenue,” the report says.

Tecnoglass in November reported third quarter revenues up 26% year over year to $130.4m and net income of $20.9m, up from $8.3m in the prior year quarter.

The company also posted a record third quarter gross margin of 39.6% and increased its full year growth outlook for revenue and adjusted EBITDA.

Read more: Homebuilder Lennar’s stock falls 3% on Q3 earnings

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