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IQE responds to critical reports

IQE responds to critical reports

Business news |
By Nick Flaherty



At the same time IQE has announced it has changed auditor.

UK based Shadowfall said in a report published February 2 that it has concerns over the valuation of IQE that are focused on two joint ventures created in 2014, one in Cardiff called the Compound Semiconductor Centre (CSC) and one in Singapore. The company said that transactions related to the JVs appeared to be “somewhat circular.”

IQE responded on February 5 with a regulatory statement: “The allegations contained within the report are without merit and provide a misleading analysis of the company’s financial position. The central thesis of this report is a fundamental misrepresentation of the profit and cash generation of IQE, especially with respect to the company’s joint venture agreements.”

US-based Muddy Waters Capital LLC joined in on February 8 saying that it too was short on IQE and argued that IQE’s 2015 and 2016 accounts included transactions with CSC that are not substantive, and alleged that the accounting may have been designed to deceive investors.

IQE immediately posted another regulatory statement saying: “Information in the Muddy Waters report is either factually inaccurate or has previously been disclosed in IQE’s annual reports and financial statements. It is also important to note that, like ShadowFall, Muddy Waters also holds a short position in IQE and so duly profits from any near-term reduction in IQE’s share price.”

Next: The Cardiff position


On February 12 IQE reported a statement from its joint venture partner Cardiff University, which read: “Cardiff University has invested equity of £21.8 million in the Compound Semiconductor Centre. IQE contributed their share in hardware, infrastructure and licensing intellectual property, all independently valued. The university entered into the joint venture as a strategic investment to ensure our world leading research has a well-founded route to commercialisation. Several project wins have been announced within the last year. Co-owned and controlled by Cardiff University and IQE, CSC applies corporate standards of governance including an independent chair, regular joint board meetings, annual reports and published accounts. The university is represented on the CSC board by appropriately qualified directors.”

On February 12 IQE also notified investors that it has appointed KPMG LLP as its auditor, replacing PricewaterhouseCoopers LLP (“PwC”) who had acted as IQE’s auditors since 2005.

IQE said KPMG had been appointed after a competitive review process conducted in December 2017. IQE added that as part of the handover from PwC to KPMG IQE has given a written assurance that there are no matters which need to be brought to the attention to the company’s members, creditors or directors. IQE said that in light of the two recent reports published by funds with a short position in IQE, it wanted to go beyond the disclosure requirements as stated under the Alternative Investment Market rules.

Related links and articles:

www.iqep.com

www.shadowfall.com

www.muddywatersresearch.com

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