Codere Online is navigating turbulent times with the looming threats of a class action lawsuit and a potential Nasdaq delisting, despite an impressive business performance throughout 2024.
Auditor Resignation and Its Implications
On December 27, Codere Online parted ways with its auditor, Marcum, due to significant IT and internal control deficiencies that impeded the completion of necessary audit procedures. This resignation was initially communicated to Codere on December 20, with the audit firm outlining the challenges preventing the completion of Codere’s financial information.
The delayed submission of Form 20-F, prompted by ongoing audits for the three years ending December 31, 2023, has placed Codere at risk of violating Nasdaq Listing Rule 5250(c)(1). This delay is attributed to internal control shortcomings discovered in 2021 and 2022, including inadequate accounting, lax controls, and suboptimal cybersecurity protocols.
Codere has appealed the delisting, assuring that it is working diligently to submit the delayed Form 20-F for 2023 as soon as possible.
Investor Class Action and New Auditor Appointment
Following Marcum’s resignation, Codere Online appointed MaloneBailey as its new independent registered public accounting firm. Meanwhile, law firm Pomerantz has launched an investigation on behalf of Codere’s investors, probing potential securities fraud and other illicit practices.
This turmoil has had an immediate impact on Codere’s stock, causing its share price to decline by 3.84% following Marcum’s resignation and continuing to fluctuate. As of now, Codere’s shares are valued at $6.41. On January 16, Codere is expected to request an extension to complete its audit and regain Nasdaq compliance.
Strong Business Performance in 2024
Despite these challenges, Codere’s business performance in 2024 has been exceptional. The latest financial report submitted in November highlighted a 20% year-on-year increase in net gaming revenue for Q3, driven by strong performances in key markets such as Mexico and Spain.
Codere Online expects EUR 205-215 million in net gaming revenue for 2024, along with an adjusted EBITDA of EUR 2.5-7.5 million. CEO Aviv Sher and CFO Oscar Iglesias have expressed confidence in these projections, with Iglesias stating: “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.”
In its report, Codere reiterated its ambition to regain Nasdaq compliance and continue its growth trajectory despite the current challenges.
