The issue of non-standard convertible bonds under scrutiny by the Milan Public Prosecutor’s Office

The Special Currency Police Unit of the Guardia di Finanza, acting on the instructions of the Milan Public Prosecutor’s Office, has executed a preventive seizure order, issued by the investigating magistrate, in respect of the shares and equity interests in four companies – three of which are listed on the Euronext Growth Milan market – belonging to the Ops Group, which operates in the telecommunications and media sectors. The companies in question are Ops eCom (formerly Giglio Group), Ops Retail (formerly Netweek) and Ops Italia (formerly Eems Italia).

Among those under investigation for whom pre-trial detention has been requested is Ciro Di Meglio, CEO of the Ops Group. The seizure (over 100,000 euros) is reportedly based on evidence of alleged profits derived from the offence of market manipulation. Furthermore, at the offices of the Milan Currency Police Unit, at least ten preliminary interviews with as many suspects are reportedly currently underway. The investigation is being coordinated by public prosecutors Guido Schininà and Nicola Rossato of the first department, headed by Deputy Public Prosecutor Roberto Pellicano.

 The alleged offences range from market manipulation, obstruction of the supervisory authorities’ functions, false corporate disclosures by listed companies, fictitious capital formation, misappropriation of public funds and corporate administrative liability for offences committed for the companies’ benefit by their directors. CEO Ciro Di Meglio, together with the general manager for listed companies, ‘with the involvement of 33 directors, statutory auditors, company directors and professionals’, is alleged to have engaged in ‘unlawful conduct’ aimed at ‘subscribing to fictitious capital increases, draining liquidity from listed companies, raise funds, including through the acquisition of state-guaranteed loans, to be used for purposes other than those specified in the loan agreement, and defraud the financial market through the misuse of non-standard Convertible Bond Loans (POCs), amounting to over 30 million euros”.

The issue of POCs was addressed by Plus24 in August four years ago with a cover story which, as early as 2022, highlighted the lack of transparency surrounding an instrument used primarily by companies facing liquidity crises. These included Eems (now Ops Italia), which at the time was listed on the main market. The mechanism had also been used by at least 12 other companies listed on the EGM platform. These included, in addition to Askoll, Axélero, Caleido Group, Casta Diva Group, Energica 1 and 2 Illa, KiGroup, Mondo TV, Prismi 1 and 2, and Visibilia – a company previously linked to the former Minister for Tourism, Daniela Santanché. It is precisely Visibilia and its related companies that are being investigated by Public Prosecutor Rossato, who is also in charge of this latest inquiry. It cannot be ruled out that the investigation may be extended to other cases as well.

Almost all convertible bonds (with the simultaneous issue of warrants) were reportedly issued by the companies at the instigation of an Emirati entity (Negma Group and its subsidiary Capital Group International Inc), which is said to have subscribed to them in several tranches, providing the listed companies with a cash injection essential to their survival, but at the same time causing significant losses in the market value of the shares and, consequently, to their shareholders.