LPP, the Polish clothing firm behind Reserved and Diverse watched sales plunge over a third, despite the board’s failure to recover after denials of allegations from analyst firm that it had kept an interest in its Russian subsidiary after its sale.
Allegations of sanctions busting, insider dealing, reports to the prosecutor’s office, a record breaking share price slump: Friday’s action on the Warsaw stock exchange got heart’s beating on a day investor’s call “The Three Witches” referring to the sinister characters in Shakespeare’s Macbeth, who plotted misdeeds on the 15th of March , known to the Romans as “The Ides”.
LPP’s share price bottomed out after a dramatic plunge of 36%, following a Hindenburg Research report alleging that the company, which had been lauded for exiting Russia, had actually engineered a complicated structure via Dubai and the Far East to keep on trading and profiting from Russian sales. An LPP statement at the end of Warsaw trading threatened court action against Hindenburg for ruining its reputation.
The report said that even though the outlets reopened with new names abbreviated from the originals, the new owners were actually linked back to LPP through a complex mechanism. Hindenburg alleged that Far East Services, a Dubai-based company, which bought the Russian subsidiary of LPP, had actually been traced to LPP back in Poland.
The Hindenburg reporters assured they talked to former board members who said the deal was “a sham” and sent undercover shoppers to stores in St Petersburg in December 2023 in order to investigate. The shoppers found the same new fashion lines on sale in the stores as were available in Warsaw.
Not only that, they said that the barcodes on the price tags of items bought in the St Petersburg store had been initially faked to avoid the possibility of their fashion lines being traced back to the Polish firm. However, items on sale more recently had barcodes which included information which could be analysed by the Polish company’s finance offices. Another smoking gun in the eyes of Hindenberg, linking the former subsidiary back to the old HQ.
What the investigative investment firm failed to mention was that they had shorted LPP’s shares before the publication of the report, knowing that the value of the company would fall. Shorting - a term famous from the market crash of 2008-9, and in simplistic terms means that Hindenburg had essentially taken a trading bet on the shares of LPP falling, and profited on the shares’ devaluation. The omission of this information casts a shadow on the company’s research.
After a day of drama shareholders and shoppers alike will be waiting for the next chapter in a thrilling tale. LPP, the owner of several high street brands, has been the darling of investors and one of a group of Polish retailers, including CCC and Black Red White which have successfully taken on the world - or at least the world East of Berlin, bravely expanding supply lines into Asia and earning more out of Poland than domestically.
The old PolandIn, TVP World’s predecessor, whose mission statement was to show “the best of Poland” proudly reported on the opening of Reserved’s first UK shop on Oxford St in central London.
Again, when Russia started its full-scale invasion of Ukraine, the Reserved owner was one of the first companies to say it would pull out of Russia. Again, we praised the Polish champion, this time under the garb of TVP World.
Hindenburg has a history of making major allegations against companies. The Indian company Adani was another of its targets. They also denied Hindenberg’s allegations. We are expecting further chapters of the tale. But meanwhile, “Beware the Ides of March”.
LPP’s share price bottomed out after a dramatic plunge of 36%, following a Hindenburg Research report alleging that the company, which had been lauded for exiting Russia, had actually engineered a complicated structure via Dubai and the Far East to keep on trading and profiting from Russian sales. An LPP statement at the end of Warsaw trading threatened court action against Hindenburg for ruining its reputation.
The report said that even though the outlets reopened with new names abbreviated from the originals, the new owners were actually linked back to LPP through a complex mechanism. Hindenburg alleged that Far East Services, a Dubai-based company, which bought the Russian subsidiary of LPP, had actually been traced to LPP back in Poland.
The Hindenburg reporters assured they talked to former board members who said the deal was “a sham” and sent undercover shoppers to stores in St Petersburg in December 2023 in order to investigate. The shoppers found the same new fashion lines on sale in the stores as were available in Warsaw.
Not only that, they said that the barcodes on the price tags of items bought in the St Petersburg store had been initially faked to avoid the possibility of their fashion lines being traced back to the Polish firm. However, items on sale more recently had barcodes which included information which could be analysed by the Polish company’s finance offices. Another smoking gun in the eyes of Hindenberg, linking the former subsidiary back to the old HQ.
What the investigative investment firm failed to mention was that they had shorted LPP’s shares before the publication of the report, knowing that the value of the company would fall. Shorting - a term famous from the market crash of 2008-9, and in simplistic terms means that Hindenburg had essentially taken a trading bet on the shares of LPP falling, and profited on the shares’ devaluation. The omission of this information casts a shadow on the company’s research.
After a day of drama shareholders and shoppers alike will be waiting for the next chapter in a thrilling tale. LPP, the owner of several high street brands, has been the darling of investors and one of a group of Polish retailers, including CCC and Black Red White which have successfully taken on the world - or at least the world East of Berlin, bravely expanding supply lines into Asia and earning more out of Poland than domestically.
The old PolandIn, TVP World’s predecessor, whose mission statement was to show “the best of Poland” proudly reported on the opening of Reserved’s first UK shop on Oxford St in central London.
Again, when Russia started its full-scale invasion of Ukraine, the Reserved owner was one of the first companies to say it would pull out of Russia. Again, we praised the Polish champion, this time under the garb of TVP World.
Hindenburg has a history of making major allegations against companies. The Indian company Adani was another of its targets. They also denied Hindenberg’s allegations. We are expecting further chapters of the tale. But meanwhile, “Beware the Ides of March”.
