Infomatec

» see infomatec.de as it lived, on the wayback machine

~ the obit ~

In 2001 Turkey was busy having a currency collapse of its own. A small-cap fraud in Augsburg was never going to reach the 56k dial-up line I was using. Infomatec is a story I came to years afterward and only as a reconstruction, which is how most foreign financial scandals arrive: every detail available, none of it ever yours.

The company was founded in Augsburg in 1988 by Alexander Häfele and Gerhard Harlos, and for ten years it did something boring and real. It sold software and IT support to corporate customers. Revenue from the internet was close to irrelevant. Then the late 1990s arrived, the founders noticed where the money was, and Infomatec started talking about set-top boxes that would turn an ordinary television into something you could surf the web on. Smart TVs did not exist yet, so the pitch had no obvious counter-argument. WestLB took the company onto the Neuer Markt in 1998 at an issue price of 53 marks a share, even though the valuations in front of it disagreed with each other wildly, and by May 1999 Infomatec was the second most successful new issue of its year with a market capitalization of 1.5 billion euros.

Then the number started falling, and the announcements started. On 20 May 1999, repeated on 13 September, Infomatec told the market it had won a 55 million mark contract from Mobilcom for 100,000 set-top boxes. Immediately afterward came another 55 million marks, this time from a Pforzheim firm called Global Well. Two months later a French company was said to have ordered 50 million marks worth. Mobilcom had ordered 14,000 boxes, and the ones delivered failed testing. The other two orders had never happened at all.

~ the rap sheet ~

~ the ad-hoc machine ~

The weapon here was a disclosure rule. Ad-hoc publicity exists so that material facts reach every investor at the same moment instead of leaking to the people with the best phone numbers. Infomatec worked out that a channel nobody is allowed to ignore is also a channel nobody checks in advance. Between May and November 1999 it put three contracts through that channel.

While the share price responded, Häfele and Harlos were selling. Each of them took roughly fifteen million euros out of their own company on the strength of orders they knew were fiction. The last ad-hoc notice was the only honest one: the revenue forecast dropped from 90 to 100 million marks down to barely over 50 million, and the board conceded that what it had been saying was substantially overstated. The 2000 accounts eventually showed 21.6 million marks of revenue against a 100 million mark loss.

~ the football club ~

Infomatec was the main sponsor of FC Augsburg, then in the third-tier Regionalliga Süd, and its name was on the shirts. It had also promised the club a guarantee of 3 million marks. When that guarantee evaporated along with everything else, Augsburg lost its license in 2000 and was relegated by force. A football club in a mid-sized Bavarian city took a division of damage because a software company needed a share price.

~ the trial ~

Häfele and Harlos were arrested in November 2000, six months before the insolvency petition. The prosecutors initially argued the whole flotation had been a swindle, since nobody inside could have failed to notice that a company valued at 207 million euros for pricing purposes was worth about 5 million, but that charge was dropped. In November 2003 the Landgericht Augsburg convicted both men of deliberately misinforming investors and of insider dealing. Harlos, who confessed in part, got two years suspended and a fine, with his assets forfeited to the state. WestLB and one of the valuers ended up under criminal investigation themselves.

The estate was still not wound up ten years after the filing, and there will be no final distribution because the liabilities run to roughly three times what there is to distribute. The share was finally removed from listing on 7 April 2013.

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