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More Trouble For PBG


PBG share price down 97%.

'Disinvestment process' grinds to a halt.

Misappropriation of funds alleged.

Ukrainian law-enforcers begin investigation.

ministersky residential complex

Every investor on earth makes bad calls sometimes. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of PBG S.A. (WSE:PBG), especially in Ukraine.

PBG's share price is down a whopping 97% in the last three years. That is enough to cause even the strongest minds some disquiet. Moreover, it's down 26% in about a quarter. That's not much fun for holders and it is a living hell for the two hundred families waiting for the Polish developer to finish building their new homes in Kyiv.

PBG is not a profitable company. Over the last three years, its revenue has dropped 3.4% per year and the 69% annualized share price decline highlights the risk of investing in poorly managed ventures.

Making matters worse, the company's "disinvestment process" in Ukraine has gone off the rails, according to PBG's 2019 Q1 report of consolidated earnings. That means the Polish developer's creditors will have to reschedule the maturity date of the bonds maturing on June 30, 2019 (G series, G1 series and G3 series for PLN 61,934,800).

Investigative journalists in have tracked down PBG funds misappropriated by its Ukrainian subsidiary Energopol-Ukraine. The trail leads to investors and PGB S.A.’s creditors, who are today trying to cover their tracks. Minority shareholders, who for years have not received dividends, have also suffered losses.

Energopol-Ukraine ten years ago started first-phase construction on a housing complex in Kyiv, on Kondratiuk 1 Street in the capital's Obolon district.

Kyiv-based journalists say funds on the account of Energopol-Ukraine were transferred based on fictitious contracts. For example, $5 million was spent on drawing up a "business plan" for a project in which only $9.7 million was actually invested. In addition, $7 million was transferred to a Polish company "for the production of project documentation." Initially, the money was transferred to a small intermediary firm, and then withdrawn to Poland.

Two other companies – PBG-Ukraine and Stroy Holding – were intermediaries in between the customer and the real contractor. Payment for their services was not the usual 3%-5% rate, but much, much more. In addition, PBG's Ukrainian partner, the ultimate beneficiary of which is Jerzy Wisniewski, received about $3 million as a result of overstating the costs of construction in which he did not participate.

Letters to Wisniewski and PBG's Board of Creditors informing them about the financial abuses, as well as gross violations in the management of the company have so far gone unanswered.

Starting in 2019, problems at Energopol-Ukraine had become blatantly obvious and well known throughout Kyiv's construction market. Attempts were made to illegally use the Ministerial housing complex brand, an apartment sales system was undermined and indicators fell.

Ukraine's law-enforcement agencies have begun investigating. What they find could determine the fate of PBG in Ukraine and the price of the company's "disinvestment."

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.