Mutares hits back after short-seller attack

German private equity firm Mutares responded on Friday to allegations made by short-seller Gotham City Research, insisting that discrepancies in its cash balances were down to a transcription error.

In a note published on Thursday, which sent shares in Mutares tumbling, Gotham pointed to accounting irregularities and suggested that Mutares was "increasingly reliant" on debt.

It noted that the first-half balance sheet’s €394.2m reported cash position did not match the H1 2024 statement of cash flows’ €422.2m reported cash position.

Responding to that research note on Friday, Mutares said: "The report identified a discrepancy between the cash and cash equivalents reported in the consolidated statement of financial position as at June 30, 2024, and the corresponding item in the consolidated statement of cash flows in the condensed interim consolidated financial statements as at June 30, 2024. According to the consolidated statement of financial position, the item amounts to €394.2 million, while the consolidated statement of cash flows shows €422.2 million.

"However, the discrepancy in the items in the published version of the interim financial statements is merely a transcription error that occurred inadvertently during the conversion of the binding financial information into the graphic format for the publication of the half-year financial report 2024 on Mutares’ website."

Mutares added that condensed interim consolidated financial statements as of 30 June 2024, prepared and signed by the management board of the general partner correctly show the value of €422.2m for cash and cash equivalents both in the consolidated balance sheet and in the consolidated cash flow statement.

"This purely editorial error will be corrected immediately and could easily have been clarified upon request," it said.

Mutares also hit out at the research report more broadly, saying that it "firmly rejects" the accusations made.

It said the company’s business model, which also includes global expansion, requires initial investments, "which experience has shown to pay off with the first transactions".

Mutares also pointed out that its growth strategy includes "significant investments in the existing portfolio with the clear goal of a return on invested capital of 7-10x".

"Successful Mutares exits in 2022-2024 with net proceeds of over €200 million confirm the Mutares strategy," it said.

At 1030 BST, the shares were still under the cosh, down 6.3% at €20.80.