(Bloomberg) — An adviser probing the alleged accounting fraud at Indonesian agritech company eFishery recommended that investors make a decision on whether to liquidate or restructure the firm as soon as this month, in light of the rapid unraveling of the high-profile startup, according to a document reviewed by Bloomberg News.
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In a few weeks, shareholders should vote on whether to wind down, restructure, or sell the company entirely or partially, according to a letter of engagement from FTI Consulting Singapore Pte, the adviser hired by eFishery’s board. Meanwhile, a trade union organized by staff is pushing for the company to cancel mass job-cut plans and resume its business.
The adviser will first conduct an independent review to assess eFishery’s cash flow position and projections, the solvency of the business, its loans and guarantees as well as its assets and liabilities position, according to the nine-page document. Shareholders will then decide on a course forward. The timeline is still fluid and the review might take longer to complete than currently estimated, according to a person familiar with the matter.
A recent internal probe into the startup, backed by investors including SoftBank Group Corp. and Temasek Holdings Pte, alleged that eFishery inflated its revenue and profit over several years. Investigators estimated that management inflated revenue by almost $600 million in the nine months through September last year. That would mean more than 75% of the reported figures were fake.
A representative for FTI, which has taken over management of the company, declined to comment, as did spokespersons for Temasek and SoftBank.
EFishery, which deploys feeders to fish and shrimp farmers in Indonesia, was a darling of the nation’s startup scene and scored a valuation of $1.4 billion when G42, an AI firm controlled by United Arab Emirates royal Sheikh Tahnoon bin Zayed Al Nahyan, backed its latest funding round. It has raised hundreds of millions of dollars in an attempt to modernize the country’s fish industry, providing farmers with smart feeding devices as well as feed, and then buying their produce to sell into the broader market.
Investors were initially enticed by its profitability at a time when layoffs, CEO resignations and plummeting valuations in the tech sector dominated headlines. It presented a $16 million profit for the first nine months of 2024 to investors, but the investigation commissioned by the board alleges the firm actually generated a $35.4 million loss.
The allegations of fraud may be damaging for Indonesia’s startup scene, and come at a critical time as young companies and investors in the country struggle to raise new funding. EFishery was the nation’s latest so-called unicorn, or a startup valued at more than $1 billion.
–With assistance from Min Jeong Lee and Yoolim Lee.
(Updates with response from SoftBank in fifth paragraph.)
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