Codere Online Luxembourg, S.A. is grappling with a securities fraud investigation and the potential delisting of its shares from Nasdaq. The developments follow the resignation of its auditor, Marcum LLP, and growing investor concerns regarding the company’s internal controls and financial transparency.
On December 27, 2024, Codere disclosed to the U.S. Securities and Exchange Commission (SEC) that Marcum had formally resigned as its independent registered public accounting firm. The resignation stemmed from “IT general control deficiencies” related to third-party platforms and inadequate internal mechanisms to address these issues. Marcum emphasized that these deficiencies hindered its ability to obtain sufficient evidence for a comprehensive audit.
In its filing, Codere clarified that there were no disagreements with Marcum regarding accounting principles or disclosures. However, the company acknowledged long-standing internal control weaknesses previously reported in both 2022 and 2021, including insufficient technical accounting expertise and ineffective oversight of cybersecurity measures outsourced to the Codere Group.
Investor Class Action and Nasdaq Compliance
The resignation triggered immediate market repercussions, with Codere’s stock price dropping by 3.84%, closing at $6.77 per share on the same day. In response, Pomerantz LLP, a prominent law firm specializing in corporate and securities litigation, launched an investigation into potential securities fraud and unlawful practices.
Pomerantz LLP issued a press release in which it highlighted concerns about Codere’s ability to ensure accurate and complete financial reporting. According to the firm, these allegations are serious enough to warrant a class-action lawsuit on behalf of affected investors.
Compounding these challenges, Codere faces a Nasdaq delisting notice for its failure to submit its 2023 Form 20-F, a requirement for maintaining listing compliance. The company has a hearing scheduled for January 16, 2025, where it plans to request an extension to complete the audit and regain compliance. Despite this, its stock has seen a steep decline, dropping over 20% in the past month to trade at $6.38.
Efforts to Rebuild Trust
Codere recently appointed MaloneBailey, LLP as its new auditor for the 2023 and 2024 fiscal years, signaling its commitment to addressing its financial reporting delays. The company has also reiterated its dedication to submitting the overdue Form 20-F as quickly as possible.
While these measures aim to restore investor confidence and resolve compliance issues, the road ahead remains uncertain. Codere’s internal control deficiencies, cybersecurity oversight concerns, and the broader impact of these allegations continue to weigh heavily on its market performance.
As Codere navigates this turbulent period, its next steps will likely determine whether it can regain investor trust and sustain its Nasdaq listing. Investors await the outcome of the January hearing and any updates regarding the securities fraud investigation.
