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In the shadow of the emerging Covid outbreak, OTT-One managed to close an industrial deal valued at more than ten billion guilders, but the former brokerage firm has not shown any signs of life for some time now. Since last year, the company has had no board of directors or supervisory board, and when the National Tax and Customs Administration failed to locate it at its headquarters, the authority to cancel its tax identity number. Finally, the Budapest Metropolitan Court declared the company dissolved in early February.
It is only a matter of hypothesis as to how the company’s trail can simply lead from a wave of public investment to liquidation. The company’s balance sheets drawn up in recent years would provide some indications, but since 2019, a row of auditors has refused to authenticate them. one after the other. In other words, monetary experts found the company’s account of economic occasions and the evolution of the company’s assets credible.
Not long ago, however, OTT-One was one of the lucky pioneers that had the chance to participate in the Chinese ventilator market, valued at several hundred billion guilders, led by the Minister of Foreign Affairs and Trade, Péter Szijjártó. worry about tenders; In the past, OTT-One had told our newspaper that they themselves had contacted the government and presented their facilities in the purchase process, bringing out their smart relations with China. State agencies have ordered life devices from dozens of commonly unknown corporations in the health sector. industry, paying the acquisition value without delay after contracts are signed. The deal also looked like a wonderful opportunity for OTT-One, as
These orders, totaling more than 12 billion guilders, represented a huge leap in the life of the small brokerage company, as its previous peak profit (in 2019) had not even reached 2. 9 billion guilders. In addition, its profile used to be very different: most of its profits came from security generation ($1. 2 billion), traditional software orders ($1 billion) and video content ($498 million).
Initially, shareholders had the opportunity to profit from the trades: OTT-One’s shares, which before the pandemic fluctuated between two hundred and three hundred guilders, fell to an all-time low of 89 guilders on March 19, 2020, shortly after. However, at the end of March, the value recovered above two hundred guilders after news spread regarding ventilator agreements with the ministry. When the announcement of an even larger acquisition of 7. 7 billion guilders was published, the shares were already trading at 245 guilders, meaning that the most demanding investors can triple their stake at most in just over a month.
Prior to the Chinese deals, the company’s documents were a mystery, at first examined in more detail through the G7 business news portal. The site’s journalists highlighted the company’s extensive network of connections involving corporations in Colombia, Dubai, the United States, Congo and Nigeria, while OTT-One hired only 21 people. They also raised the question of why investors priced the company so high: after all, the shares with a nominal price of 18 guilders held for 54 years of gains.
More than 80 percent of inventories were in public hands, and at the time only two known owners owned more than five percent, the threshold for official disclosure. One was iSRV Plc. , while the other was Nándor Tűzkő, he mentioned However, Tűzkő’s stake fell below five percent in 2019 after an off-exchange sale, so his call no longer appears in stock market news (this is how mentions of iSRV also disappeared from the announcements). However, the medical professional did not stray far from politics: he was assigned a position at the head of nationalized infertility centers; even after the merger of the five companies, he remained a member of Ducallnti’s advisory board. REK IVF at the time of publication of our article. Tűzkő is connected to Orbán’s family circle through some other thread: he is connected to the prime minister’s brother, Áron Orbán, through his arms trading company Multi Shoot Ltd. This commercial appointment was made known through the research portal Direkt36.
However, large government orders and billions in prepaid public budget have not resulted in massive profits, stock price increases, or dividend showers for OTT-One. Instead, there was a dramatic turn of events: in April 2021, the Hungarian National Bank, which is guilty of supervising brokerage firms, suspended trading in OTT-One shares. The quick explanation of why the company’s auditor had terminated its contract, also compromising the company’s ability to have an accepted balance sheet for the year 2020 before the April 30 deadline.
At that time, the MNB had already opened an in-depth investigation and had even filed a complaint with the Budapest Public Prosecutor’s Office.
Auditor István Gyapjas resigned on suspicion of fraud. He mentioned, among other problems, the discovery of contradictory invoices and did not have to worry about the credibility of the balance sheet.
Gyapjas has been included in the 2021 Quality Control Plan of the Public Supervisory Authority that supervises the auditors of the Ministry of Finance, thus putting the audit of OTT-One at the forefront. The authority did not specify whether it was a planned or ordinary inspection. However, it is clear from its website that quality audits should be carried out at least every three years for auditors providing services to public-interest entities (such as brokerage firms). Documents filed with the corporate court reveal that the Ministry of Finance called Gyapjas “non-compliant” and, as we learned, fined him. In addition, it underwent another regulatory inspection, as is customary in such cases. What is more important from OTT-One’s point of view is that the authority has also revoked the audit of the 2019 balance sheet conducted through Gyapjas – Gyapjas, by the way, no longer provides audit services to public-interest entities.
After the auditor who succeeded Gyapjas also refused to accept OTT-One’s accounts, the company has not settled its balance sheet through an auditor for three consecutive years since 2019. And that’s not a way for a brokerage firm to operate. as it is mandatory. Provide credible financial insights so investors can make informed buying and selling decisions.
As mentioned above, the Hungarian National Bank opened an investigation into the company in August 2020. The effects were as follows:
Finally, in October last year, the central bank ordered the delisting of OTT-One Inc. ‘s shares from the stock exchange, stating in its press that
During the company’s operation, MNB was forced to initiate criminal proceedings on suspicion of accounting irregularities, fraud and illegal market manipulation.
When asked about the prestige of the investigation and criminal proceedings, the central bank advised contacting the relevant investigating authorities. It is worth noting, however, the data provided through Péter Polt, the Hungarian Prosecutor General, in reaction to a letter by Bertalan Tóth, the leader of the parliamentary fraction of the Hungarian Socialist Party (MSZP), last October. According to this reaction, 4 investigations were opened on the basis of the NBM report:
In the cases investigated, the competent investigating authority is guilty of the process. However, we have not received any reaction from the National Police Directorate in relation to the court cases handled and the existing prestige of the OTT-One file.
One can only see that the shares were gone and may no longer be traded. The company disappeared, along with all its assets, and many lost all their money.
– one of the former small shareholders of OTT-One complained to our newspaper. According to the investor, the suspension and eventual exclusion of the central bank from the list came unexpectedly. According to him, it is possible that a number of crimes had been committed, but “It’s not other people’s bars that interest us; In fact, that’s what I’m least interested in; rather, we need to recover the company’s assets and get our cash back. He writes: “The biggest question is where are all the bars. The cash is gone. Money doesn’t disappear or evaporate; It’s somewhere out there.
Our editorial team has received reports that many small investors have already filed complaints. The Prefecture of the National Police responded to our questions on this topic, but a document it sent to us shows allegations of significant fraud and deception of investors, emphasizing the duty of control and interested persons/organizations from 2018 to November 2022. To be exact:
Conversely, OTT-One’s new control publicly revealed to its investors in 2023 that a new internal audit had revealed that the monetary position communicated through the company’s previous control was false. The company didn’t even have enough budget to pay the auditor’s expenses. and its stock market presence was practically unsustainable.
Some also question the duty of the Hungarian National Bank. ” Yes, that’s how the stock market works, there are risks, but here the tap is turned off from one moment to the next, without warning, leaving everyone’s cash blocked. “- said a small investor. In previous stock market crashes, they gave investors several days to sell their shares, at any price, so as not to get stuck,” he condemned the central bank for freezing investments.
If we look at the balance sheets that OTT-One had drawn up and submitted to the business court (but which were authenticated by the auditors), revenue was particularly higher thanks to Covid activity: the company recorded a turnover of 11. 7 billion guilders in 2020 and 6 billion guilders in 2020. . in 2021. However, the benefits pale in comparison. While the other companies involved in the venture made huge profits, OTT-One’s net profits were unusually low, at HUF 202 million and HUF 54 million, respectively. In addition
The company reported losses of HUF 3 billion in 2022.
As it turns out, the significant increase in profits seen in 2022 has done nothing to make the company more profitable.
Most of OTT-One’s $11. 7 billion in cash revenue, or 11. 1 billion guilders, was absorbed through curtain prices, while net profit declined from 2019, when cash income was just $2. 8 billion. The distribution of cash revenue doesn’t reveal much either: the company lists $8. 52 billion in “trade in fitness products and similar services,” versus $8. 47 billion in curtain costs and expenses. While this item relates to the purchase of ventilation devices and face masks, obtaining public contracts is hardly worthwhile.
Almost part of all curtain spending was funded through iSRV. OTT-One states that the company was “the company’s number one asset provider in fiscal year 2020. “The specification of the assets discussed in the report was not disclosed. However, there is evidence that audits were occasionally conducted to review contracts similar to the company’s procurement and sale of ventilators in 2020, as well as contracts between the company and iSRV Plc. and Polaris IT Group SA. (As mentioned above, iSRV was in the past a shareholder of OTT-One with more than a 5% stake, while Polaris IT is the parent company of iSRV. )There is also no indication of significant gains in iSRV, however, it is a fact that in the Covid era, its revenue has increased even more than that of OTT-One: the figures were 10. 2 billion and 9. 4 billion respectively in 2020 and 2021.
2021 was not a better year in terms of monetary results; It wasn’t until January of that year that the remaining 300 ventilators from last year were procured through the National Center for Health Services (whose legal successor is the National Directorate General of Hospitals). Against a turnover of $6 billion, the company recorded $5. 8 billion in curtain spending. The term “fan” doesn’t even appear in the text supplement, yet the fitness and other products industry accounted for $4. 9 billion in total revenue, most commonly offset through curtain expenses, meaning the company either didn’t make a profit on fans or the profits accrued elsewhere.
From 2022 onwards, the reports were drafted by a new management. The Board of Directors concluded that certain events had occurred in the company that advised very low sales and that also led to the
The company loses most of its assets, taking into account the impairments recorded in the 2022 financial year.
In addition, the company’s ability to meet its payment obligations can be severely limited, while keeping the company in its current form seems like a moderate solution – summed up the company’s new management.
Reports revealed that the company’s profits had fallen to 1. 1 billion guilders, while curtain expenditures of similar magnitude were underway. Combined with the significant write-downs and write-offs for the year, the company recorded a total loss of HUF 3 billion. The pieces described in the statements are a billion-guilder server farm acquired through OTT-One in 2021, control of which may not determine return on investment due to a lack of documentation.
The losses have pushed OTT-One’s equity into negative territory, meaning its liabilities exceed its assets, leading to the threat that “in the event of legal proceedings, there would be no money available to settle the obligations,” the new control projects. . It seemed heavy and sincere, but it wasn’t enough to get the final legal monetary reports through an auditor. Regarding the 2022 balance sheet, the auditor informed the MNB that it had to factor in a qualified opinion, the reasons for which were contained in the audit report, which it was unlikely to deliver to the company because the company had not yet fulfilled its contractual obligations required for the submission of the report. According to the interpretation of the company’s small investors, this meant that OTT-One was not even able to pay for the audit. That was the scenario in the summer of 2023 and in October.
The Hungarian National Bank removed the company from the list of brokerage firms.
The case of fraud and misleading information to influence share prices, raised by the company’s small shareholders, could be successful if it is found that the company deliberately communicated false data to mislead public opinion, according to Gábor Dióslaki, president of the Association of Individual Shareholders. Stock Market Investors (TEBÉSZ). If a refund claim on this basis is successful, the liability may primarily lie with the company, as well as the management, board of directors and members of the supervisory board of the company. However, in the case of the national bank, which plays a supervisory role, Dióslaki believes that it is difficult to identify suspicions of damage. The MNB plays a more administrative role, checking whether brokerage firms disclose all data required by law. These obligations were fulfilled through the central bank, and it also took measures to register reports and impose fines as soon as it became aware of disruptions in the company’s monetary information. If the fines imposed through the central bank were not canceled by court, these measures may also simply result in the illegal operation of the brokerage company, which may also justify claims for reimbursement.
However, investors will also have to prove that they have suffered damages due to the loss of cost of inventories and that this damage is due to misleading information that they purchased or held their inventories. Reacting to the suggestion by small investors that the equity analyst firm’s maximum value target – maintained until the last moment – is also a form of deception, Dioslaki claimed that such an investigation is an opinion based on the company’s statements. If it turns out that the analyst had other information and intentionally communicated lies, then the question of liability may arise, but this is an unlikely scenario. However, the auditor’s responsibility can be further tested, given that he accepted well the 2019 financial statements, which were later withdrawn through the Ministry of Finance, stating that they did not meet the needs – he added.