Ongoing Concerns About GPB Auto Group’s Ability to Survive

GPB Capital’s Auto Group has released more bad news about the financial condition of the company and the likelihood that it can continue as a substantial concern.  Specifically, the New York-based private equity firm, GPB Capital Holdings, LLC produced recent filings with the Securities and Exchange Commission which included additional financial information. 

The parent company is already facing multiple civil fraud charges for their Ponzi scheme and the recent ability to maintain business as usual does not come as a shock to our experienced attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm). 

SEC Filing Reveals Uncertain Future Ahead for GPB Auto Group

The first point in the filing is that GPB Capital Auto apparently has a credit system that is set to expire in February 2022.  According to the filing, there are doubts about GPB Auto Group’s ability to convince the lender, whomever that may be, to extend the terms so that GPB Auto Group could continue to utilize it.  

There are also concerns that GPB Auto would be able to replace the lender with another.  Typically, auto sales businesses are heavily reliant on third-party financing as the business model runs on relatively small margins against large costs of inventory.  Even relatively small auto dealers can have millions of dollars sunk into the inventory of cars on their lot for sale, and they almost always rely on credit from lenders to be able to acquire that.  

If the credit facility for GPB Auto Group disappears, then these dealerships are likely to have to liquidate large portions of their inventory of vehicles very quickly in order to pay back the loan, and those sales are unlikely to be on good terms.

Secondly, GPB Automotive Portfolio LP apparently has identified “pervasive material weaknesses” for the controls over its financial reporting systems. 

Although the filing does not give specifics about what that means, it does exacerbate concerns that the company has been reporting artificially favorable financial information, including issues like cash flow, asset valuations, costs, and so forth.  

Having weak financial reporting controls does not necessarily imply intent, nor does it even necessarily result in bad information.  A system can be poorly set up to check for inaccuracies, but that does not, in and of itself, mean that it is inaccurate.  

However, when coupled with the very serious allegations about GPB Capital management and the ongoing criminal probe about a Ponzi scheme, this is highly concerning. This news comes after the SEC court appointed an independent monitor, to evaluate all GPB Capital Holdings’ portfolio companies and funds.

GPB Capital Investment Fraud Attorneys 

Our securities law firm represents investors nationwide with significant financial losses in their portfolios. In particular, we are continuing to represent investors with investments in GPB Capital Holdings that were placed in investors’ retirement plans or investment accounts. 

SSEK was one of the first firms nationwide to file a case against GPB Capital Holdings. Please contact us at 800-259-9010 for a free consultation. If there is no recovery, there will be no fee.

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