A burgeoning fashion giant has been slapped with a nearly $5 million fine by Greece’s securities regulator after allegedly manipulating the market in an effort to boost its financials. Athens-based Folli Follie – which has been of increasingly interest to analysts’ in recent years due to its global expansion efforts, consistent growth and favor amongst high-spending consumers in the Far East – was under investigation by Greek authorities beginning this spring when New York-based equity fund Quintessential Capital Management issued a report stating that FF is actually “an unprofitable, struggling company with materially smaller, and rapidly decreasing revenue, network size and cash balances.”
Despite the picture painted by the 39-year old FF, which derives nearly 70 percent of its revenue from Asia, QCM moved to short its stock, claiming that, among other things, Folli Follie overstated the number of retail outlets it operates worldwide by more than 300 stores.
Listed on the Athens Stock Exchange, Folli Follie responded to Quintessential Capital Management’s move by aasserting that the hedge fund’s claim was “false, slanderous and misleading,” and told reporters that that it was considering legal action against QCM for its statements. Until QCM's founder Gabriel Grego announced the results of his fund’s “in-depth investigation” of Folli Follie, the Greek retailer had been valued at about $1.62 billion.
As of this week, Greece’s Capital Market Commission, the entity tasked with monitoring compliance with Greece’s securities laws, levied the almost $5 million fine, pointing to market manipulation and failure to provide requested financial data to regulatory authorities. Of that figure, which is being considered small in relation to the perceived manipulation of the market, Dimitrios Koutsolioutsos, who is chairman of the Folli Follie board, and CEO Georgios Koutsolioutsos are each expected pay $1.4 million, while the company itself was fined just over $695,000.
The financial watchdog held that “through [the 2017 financial reports from Folli Follie], these persons supplied information that gave false or misleading indications about the stock price of the company.”
Folli declined to comment on the fine.
Trading of Folli Follie Group's shares at the Athens Stock Exchange have been suspended since this spring following the release of the QCM report and a preliminary investigation into the company as ordered by the Greek government. They will remain on hold while the case is forwarded to a special prosecutor charged with handling cases involving market manipulation. All the while, Folli Follie is in the midst of a pre-bankruptcy process, with its assets temporarily being protected from its creditors after the company secured a temporary court injunction last month.
Known primarily for its upscale accessories, including handbags and jewelry, FF has been making inroads in fashion by way of partnerships with US-based Authentic Brands Group to oversee the wholesale and retail distribution of Juicy Couture in Europe, as well as with the likes of Ermenegildo Zegna, UGG Australia, Guess, Nike, Converse, G-Star Raw, and Samsonite. The company has also served as the exclusive distributor and representative for Procter & Gamble's Prestige perfumes division in Greece, which includes the fragrances for brands, such as Dolce & Gabbana, Gucci, Hugo Boss, and Escada, among others.