IQE responds to critical reports

February 12, 2018 // By Peter Clarke
Engineered wafer supplier IQE plc and Cardiff University, its partner in a Welsh compound semiconductor engineering cluster, have both responded to critical reports published by short-selling investors ShadowFall Capital & Research LLP and Muddy Waters Capital LLC.

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


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