Gowex: investors bought at 15.55 euros and lost everything within days

From euphoria to panic at Gowex: chronicle of a scam

One investor bought at 15.55 euros. He bought again at 8.30. And again at 7.90. When a report from a foreign fund cast doubt on Gowex's accounts, the reaction of many small shareholders was not to sell: it was to buy more. "The stock market rewards the brave and punishes the cowards," one of them wrote. Days later, the company's founder admitted the fraud and the stock was suspended. The story of that week, reconstructed from the messages the investors themselves left in writing, is one of the clearest portraits of confirmation bias applied to other people's money and to one's own.

What the report that triggered the panic actually said

The trigger was a report from an analysis firm questioning Gowex's accounting. Gowex was a company listed on the Mercado Alternativo Bursátil (Spain's alternative stock market for small caps) that deployed wifi networks in cities. The document claimed the company had inflated its revenue and warned that the firm behind it might hold short positions in the stock. For many shareholders, that last point became proof that the whole thing was a manipulation.

The majority defence repeated three arguments. First, that Gowex had been operating for more than 20 years and had paid 10 million in taxes in 2013, which in their view ruled out fraud. Second, that its presence in cities was real and verifiable. Third, that the report was shoddy, with no fact-checking and a ridiculous logo. "The moment I read that they may have short positions, I knew today was the time to buy like crazy," one message summed up. The logic was flawless if the report was fake. The problem was assuming that it was.

The argument nobody bothered to check

Some people did do the maths. The business model consisted of offering free wifi funded by advertising, which meant buying bandwidth from telecom operators, maintaining the infrastructure and competing with giants that stay out of that business because it is not profitable. Only one company could afford something like that, and it does not build networks. That reasoning, laid out clearly in several messages, clashed head-on with the euphoria.

The usual response was that the critics did not understand the model. "Sadly this gentleman was predicting drops with no argument other than not understanding the business model," was written about one sceptic. The investment rested on faith in the founder, Jenaro García, whom shareholders called on to step up and destroy the report's author. One even offered himself up: "Jenaro, as your shareholder, hire me if you want".

Buying all the way down: 18,000 euros and everything on the line

The order record from those days is a catalogue of crash-proof conviction. Purchases at 15.55, at 8.30, at 7.90, at 9.70, at 10.45. One message confesses: "Well, today I made 5 purchases, total invested: 18,000 euros. I've gone all in, honestly I couldn't care less what that report says." Another insists Gowex is worth 30 euros and that he would never sell in a situation like this. The word stop loss appears rarely, and when it does it is to dismiss it: if the company is that good, there is no reason to get out.

The result, once trading was suspended and there was no way to sell, was a litany of wiped-out savings. One investor said he had lost his own money and his mother's, 100,000 euros in total. Another spoke of 600,000 euros, his and his family's entire wealth. Those who sold in time did not come out of the nightmare happy either: one recounted having made 2,000 euros and feeling "more or less the same as if I had lost my initial investment" over the 4,000 he failed to make.

The audit nobody looked at before investing

With the stock already in freefall, the elementary questions began to surface. A professional auditor admitted having looked for the firm that audited the accounts and finding no data on it: "I'm an auditor and I can tell you it's a dodgy audit shop." The question arrived days late. The information on who certified the accounts of a listed company was available before buying, not after the collapse.

The other classic was the stop loss that never triggered. Some wanted to sue the bank because the protective order had not been executed. The technical explanation is simple and devastating: if trading is suspended and the stock never reopens, the stop is useless. You are left holding the shares.

Twelve years on, the trial is still pending

Gowex was declared insolvent a year after the scandal broke. The founder was released. And the trial, according to the information shared by the victims themselves, will not begin until December, twelve years after the scandal erupted. The Spanish justice system moves at a pace that turns any cautionary tale into archaeology.

Meanwhile, the founder has returned to business, this time in the solar panel industry. The news circulates among former shareholders with a mix of disbelief and dark humour. Some suggest rebranding him as "Jenaro Musk".

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The unsettling fact is not the fraud itself. It is that years earlier, in 2010, an anonymous comment on a blog had dissected the business point by point and predicted the outcome. It was there, free, before anyone bought. Nobody read it.