Codere Online in Peril amid Possible Lawsuit, Delisting

Codere Online is in peril amid various threats to its business. In addition to a possible class action lawsuit, a potential Nasdaq delisting seems to be inching closer.

Codere Parted Ways with Its Auditor

On December 27, Codere Online parted ways with its auditor Marcum. The latter was unable to complete the audit procedures Codere needed because of significant IT and internal control deficiencies and opted to resign instead.

This resignation was originally communicated to Codere on December 20 in a notification in which the audit firm highlighted the roadblocks preventing it from completing Codere’s financial information.

For context, Codere faces a Nasdaq delisting because of a delayed form submission. The company had failed to submit its Form 20-F, thus violating Listing Rule 5250(c)(1). This delay was caused by the ongoing audit of the three years ended December 31, 2023, prompted by discovered shortcomings in internal controls in 2021 and 2022.

Among other things, the deficiencies included inadequate accounting, lax controls and suboptimal cybersecurity protocols.

Codere previously appealed the delisting, promising that it is working hard on submitting its delayed Form 20-F for 2023 as soon as possible.

Codere Online Faces Investor Class Action

Following Marcum’s resignation as Codere Online’s auditor, the gaming firm appointed MaloneBailey as its new independent registered public accounting firm.

In the meantime, law specialist Pomerantz launched a probe into Codere on behalf of its investors, seeking potential securities fraud and additional illicit practices.

The whole ordeal had an immediate effect on Codere’s stock, causing its share price to slump noticeably. When Marcum resigned, the company’s shares experienced a 3.84% decline and have been fluctuating ever since. The company’s shares are worth $6.41 as of the time of this writing.

On January 16, Codere will likely demand a further extension of its deadline to complete its audit and regain Nasdaq compliance.

Codere’s Business Remained Strong in 2024

While Codere’s business is facing certain trouble, the company enjoyed exceptional business performance throughout 2024. Its latest financial report, submitted in November, highlighted a 20% year-on-year increase in net gaming revenue for Q3. This result was underpinned by favorable performance in key markets, such as Mexico and Spain, the company said.

At the time of the report’s publishing, the company said that it expects EUR 205-215 million in net gaming revenue for 2024, as well as adjusted EBITDA of between EUR 2.5 and 7.5 million.

Aviv Sher, chief executive officer of Codere Online, weighed in on the results, praising the good metrics. Chief financial officer Oscar Iglesias added:

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.

Oscar Iglesias, CFO, Codere Online

In its report, the company reiterated its ambition to regain NASDAQ compliance.