European property firm CPI Property Group has responded to accusations by short-seller Muddy Waters that its founder Radovan Vitek has been ‘asset-stripping’ the company and ‘misstating’ the value of its portfolio.
In a press release issued two and half weeks after Muddy Waters’ note, CPI said Muddy Waters’ report ‘paints a misleading picture by taking facts out of context’.
The company is confident that ‘all the transactions highlighted by Muddy Waters were properly disclosed’, it added. ‘All the transactions did not cause any negative implications for our banks and bondholders, and brought significant value to CPIPG,’ the company wrote, adding an analytical presentation of each deal.
CPI has pledged to make itself available for a Q&A session after Muddy Waters comes out with an anticipated ‘Part 2’ of their report. ‘Muddy Waters went on a fishing expedition, recycling themes that have proven successful for them in the past,’ CPI added.
On November 21, Muddy Waters published Part 1 of its report, which called into question a number of past transactions and clearly accused CPI of self-dealing and CPI founder Radovan Vitek of asset stripping the company with the aim of hollowing out its value.
In response to these allegations, CPI, which currently owns around €20 bn of assets, mostly located in Central and Eastern Europe, said that it has never obscured its relationship with Radovan Vitek, who currently owns nearly 90% of the company.
Vitek, CPI added, has contributed nearly €1.4 bn to CPI over the past 10 years. ‘None of the evidence presented by Muddy Waters to date indicates any errors from an accounting or valuation perspective’, CPI wrote, adding that valuations are conducted annually by reputable third-parties and that the firm has signed over €2 bn of sales over the past two years at a premium to book value.
In response to Muddy Waters’ accusation that Vitek used CPI to finance a new superyacht for his personal use, CPI explained that the Polma1 deal comprised 10 assets, including Maximo, a new shopping centre in Rome, and the shipyard ‘was an incidental and minor part of the transaction’.
‘The newly constructed yacht was never planned to be in the transaction perimeter which is well documented through the respective documentation,’ with the yacht being owned for a month due to 'technicalities' before being transferred to Vitek.
Upon further review, CPI is confident that all the transactions were properly disclosed and brought significant value to the company, CPI concluded.
