Codere Online struggles amid possible lawsuit, delisting

Neha Soni January 6, 2025
Codere Online struggles amid possible lawsuit, delisting

Online gaming operator Codere Online is currently under deep waters as it faces a potential Nasdaq delisting along with a possible class action lawsuit.

On 27 December, Codere Online announced that it parted ways with its auditor, Marcum. This came when Marcum was unable to complete the audit for Codere due to major IT and internal control deficiencies. According to the audit firm, these issues were severe enough to prevent them from finalising Codere’s financial statements.

The resignation of Marcum highlighted deeper issues within Codere. The audit firm pointed issues like inadequate accounting practices, lax internal controls, and suboptimal cybersecurity protocols, that made the audit not possible.

These deficiencies were primarily linked to internal control issues from 2021 and 2022. Marcum’s decision to resign reflects the serious challenges Codere faces in maintaining financial transparency and control.

Delay in form submission

Due to the incomplete audit, Codere could not submit the required financial filings for 2023. Owing to this, Codere Online also faces a threat of being delisted from the Nasdaq stock exchange due to a delayed submission of its Form 20-F. Form 20-F requires foreign companies listed on the Nasdaq to provide detailed financial information for the previous year.

The company’s failure to submit the Form 20-F by the deadline and delays in completing the audit for 2021, 2022, and 2023 have put it at risk for non-compliance and necessary regulatory action.

The company has filed an appeal to delay the delisting process. It would also request further extension on 16 January to complete the audit and be compliant with Nasdaq again. However, it remains unclear if this appeal will be granted.

Class action lawsuit

Codere also faces legal pressure as law firm Pomerantz has launched an investigation into the company. The firm is representing investors to investigate possible securities fraud by the company and whether Codere engaged in deceptive practices that affected its investors.

The legal team is looking into whether Codere misled investors about its financial status, especially concerning the delayed audits and the company’s failure to meet Nasdaq listing requirements. Investors are worried that these issues may have caused the stock price to drop, and they are now considering a class action lawsuit to recover their losses.

Despite these challenges, Codere’s business has remained relatively strong in 2024 with the company reporting a 20 percent year-on-year increase in net gaming revenue for Q3 2024. The growth in Mexico and Spain has been a significant contributor to Codere’s performance.

Codere expects to generate between €205-215 million in net gaming revenue for 2024. The company also projects adjusted earnings before interest, taxes, depreciation and amoritsation (EBITDA) to be in the range of €2.5 to €7.5 million.

Aviv Sher, chief executive officer of Codere Online, weighed in on the results, praising the good metrics. Chief financial officer Oscar Iglesias said, “With regards to our existing outlook for 2024, we expect to finish the year in the upper part of the range with respect to both our net gaming revenue and Adjusted EBITDA guidance.”

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