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Hedge fund letters, meetings, etc. in the third quarter of 2021
Initial disclosure: After extensive research, we hold a short position in Tecnoglass, Inc. stock. This report represents our point of view, and we encourage each reader to conduct his own due diligence. Please see our complete disclaimer at the bottom of the report.
Tecnoglass is a manufacturer of architectural glass, windows and related aluminum products. The company was founded in 1984 by José Daes and Christian Daes, who have served as chief executive officer, chief operating officer and director, respectively. [Article. 15, Slide 3] The Daes and family members own approximately 55% of the issued shares of Tecnoglass through an entity called Energy Holding Corporation. [Article. twenty two]
The company is still headquartered in Barranquilla, Colombia, where it operates a 2.7 million square foot manufacturing plant. The location provides cheap labor and is close to its US operations and distribution center in Miami, Florida. [Article. 7] [P. 4]
When Tecnoglass went public through SPAC trading in December 2013, 70% of its business was not in the United States. Now, 90% of its revenue comes from the United States, of which about 58% comes from the Florida market. [Slide 6]
Tecnoglass's stock price has risen 390% year-to-date, and record sales and EBITDA numbers have driven multiple expansions. According to FactSet's data, the company's LTM EV/EBITDA was 9.1 times (compared to 5.4 times in the same period last year).
The company sees the recent surge in growth as an opportunity to reduce leverage. Tecnoglass now has $69 million in cash and equivalents, and the ratio of net debt to LTM EBITDA is 0.9 times, down from 2.2 times in the same period last year. It also recently increased its dividend yield to an annualized rate of approximately 0.8%.
The company's basic growth was mainly driven by the real estate boom caused by the U.S. housing pandemic. In the most recent quarter, sales of single-family residential projects accounted for approximately 46% of total sales, compared with 18% in the same period last year. [Article. 19]
According to US Census data, Florida’s new residential building permits peaked in August, falling 28% from the high point, indicating that Tecnoglass’s main growth market is facing headwinds in the future.
In short, Tecnoglass operates in a cyclical industry that may have peaked, and we expect that even if the reported financial data is calculated at face value, this will cause fundamental erosion and multiple contractions.
As we detailed in the second part, we have serious doubts about the indicators reported by the company, and the history of management can be used as a guide to the current state of Tecnoglass.
When reviewing the management’s track record, we identified several issues that we considered to be red flags.
The Colombian city of Barranquilla, where Tecnoglass is headquartered, has long been regarded as a regional center for drug trafficking and money laundering, starting with the cannabis boom in the 1970s and then the cocaine trade in the 1980s. The city was initially controlled by criminal cartels and later by right-wing paramilitary militias.
A study published by the Caribbean University of Barranquilla concluded:
"It can be said that in Barranquilla, there is a connection between drug trafficking, paramilitary militia and the political class. The first two groups negotiate with the other group, and vice versa." [P. 7]
In 1996, 12 years after the establishment of Tecnoglass’s predecessor entity, its founders Jose and Christian Daes (current directors and CEO and chief operating officer, respectively) joined the group accused by the U.S. Department of Justice’s prosecutors, who sold more than 200 tons Cocaine was trafficked to the United States, semi-automatic and automatic weapons were smuggled back to Colombia, and the Cali cartel was laundered. [Article. 166] The indictment listed them as the "managers and operators" of the so-called Cali cartel "extortion enterprise". [Article. 15, 20]
A series of extortion charges filed by the US Department of Justice claim that the Daes brothers were part of an organization that smuggled cocaine from Colombia into the United States. They concealed cocaine in construction products such as wood and concrete, or packaged it in frozen broccoli. [Article. 112, 117, 121, 165]
The accusation also specifically accused Christian Daes (aka Cristian Daes) of smuggling semi-automatic and automatic weapons from Miami to Colombia for the cartel.
An affidavit by one of the chief investigators of the case certifies how the current CEO and director of Tecnoglass, José Manuel Daes (using the alias “Yuyo”), gave evidence to Cartel Cabos. Gilberto and Miguel Rodríguez-Arejuela provide advice on how to hide cocaine in transit. Frozen vegetables shipped from Central America to Miami. [Article. 20 and 21]
The fine in the indictment shows that Christian Daes, the chief operating officer of Tecnoglass, faces 3 counts, with a maximum sentence of life imprisonment and a money laundering penalty of up to 20 years.
The indictment also details how Daes allegedly received money from the cartel’s main US contact to purchase machine guns and ship them back to Cali Colombia.
Around 1999, José Manuel Daes was separately charged by the Colombian authorities for allegedly having additional contacts with the Cali Cartel. He was held in prison, but was later released under the order of a judge in his hometown of Barranquilla, and the charges were eventually cleared. 
According to documents in the case, Daes was accused of collecting up to $1 million from the Cali Cartel Capos from 1990 to 1994-this is a separate U.S. indictment accusing him of helping Cali Cartel smuggling cocaine and laundering money Part of the time.  [P. 2, 11]
According to court records, the check has been paid to Tecnoglass's predecessor entity and current subsidiary Energia Solar. [Article. 1] Some of the checks are accounts drawn from a front company of the Cali Cartel. The drug lords are used to bribe politicians and fund political activities. [Article. 20]
Daes’ defense stated that the payments were legitimate business income from the sale of glass and windows to the Cartel Capos and Rodriguez Orejuela brothers, as well as the $65,000 in luxury clothing sold to drug lords from Daes’ stores in Miami, until about 1993.
In their defense against the allegations of illegal profits, Daes and his legal team admitted that they were doing double bookkeeping, arguing that it was not laundering money for cartels, but evading sales tax (VAT) payments. [Article. 5, 18]
The end of the case file includes a five-page letter written by one of the three superior court judges who disagreed with the decision to remove Daes. The judge stated that the case did not take into account that Daes had been indicted by the US court in 1996 on multiple counts of smuggling cocaine and money laundering for Cali cartel, and had seized documents involving these allegations against Daes from the hands of Miguel Rodriguez Orejuela. The judge accused the investigation of “lack of critical thinking and naivety”. [Article. 17]
"Although one cannot conclude from these documents (taken from Rodriguez Orejuela) that Daes was actually involved in drug trafficking, one can infer that their relationship is much broader than a simple (legal) business relationship." [Article. 19]
The judge’s letter also briefly cited the evidence presented in the original trial that Daes may have used part of the Cali Cartel’s funds to fund the election of Bernardo Hoyos as the mayor of Barranquilla (1992) Until 1994) political movement. [Page 21]
Despite the seriousness of the allegations, and despite the specific evidence involving the Daes brothers, the allegations against Christian Daes were dropped, and the allegations against Jose Daes were dealt with in a confidential procedure. Most court records about their cases are sealed, so it is difficult to accurately state the judge’s conclusions.
A court order in May 2006 clarified that Jose Deiss was no longer considered a fugitive and that “the case has been processed”. Another court order in June 2011 indicated that the lawsuit against Christian Daes had been dismissed.
Local Colombian media speculated that these records may have been sealed to protect cooperative witnesses or cooperation with the judicial system, although Daes' lawyers denied that they had cooperated with the authorities.
The Colombian media described Tecnoglass CEO José Manuel Daes as the “virtual mayor” during the second government of Mayor Bernardo Hoyos (1998-2000). The report stated that even though Daes was in prison in the capital Bogota at the time, he still gave the orders to the elected mayor about which companies should be awarded public works contracts in Barranquilla.
The former mayor Hoyos was later sentenced to jail on corruption charges, including signing an illegal contract while in office. Another Daes company Construsenales was awarded a lucrative public works contract by Hoyos, which is still valid today.
In 2004, while José Manuel Daes was still considered a fugitive in the United States, he was shot in the head and neck in a botched assassination attempt in Colombia.
The attack caused him to be paraplegic and was later blamed on a right-wing paramilitary warlord who was aliased "Jorge 40" in a dispute with Daes and Barranquilla's then mayor Guillermo Hoenigsberg (2004-2007). According to local media reports, the illegal paramilitary leader believed that Hernisburg had offered Daes too many contracts instead of his own frontline personnel, and tried to eliminate Daes as a competitor.
Hernisburg was later convicted of corruption and sentenced to 9 years in prison.
Efforts to dismantle the Cali cartel through prosecutions in the United States and Colombia opened the door for new drug lords to fill the leadership gap in Barranquilla where Tecnoglass is located.
The Mellizos or "Twins" clan is a notorious violent group led by two brothers. The "twins" were the main cocaine smugglers and later the commanders of the right-wing paramilitary death squads.
As part of the peace talks with drug lords around 2005, court records describe the actions of the “twin” headquartered in Barranquilla:
"Between 1994 and 2000, the'twin' criminal organization shipped approximately 56,000 kilograms (56 tons) of cocaine to different countries in the world, most of which came from various paramilitary forces... and then transferred to Baran before being shipped out. Kea’s Warehouse" [P. 40]
The same records and local media reports detailed how the "twin" money laundering activities were carried out by a local Barranquilla family called the Alvarez Iragorri family. According to court records, which included a direct confession from one of the "twins", at least three of Alvarez Iragorri's five siblings were engaged in drug trafficking-related activities. [Article. 3, 5-6, 20-22]
One of the family’s siblings, Ricardo Javier Alvarez Iragorri, has been one of Tecnoglass’s early investors since at least 1998-right after the indictment of the members of the Cali cartel and the rise of the "twin" cartel-had nearly 5 % Of shares.
Since 2000, the same sibling Ricardo Iragorri has also appeared as a 10% shareholder in a company that produces and manages street signs and traffic lights run by Daes; Tecnoglass's related party entity is called Construimos y Señalizamos Ltda ("Construseñales"). [Construseñales Shareholder Record Pg. 10]
Two years later, the wife of another sibling, Ivan Alvarez Iragorri (alias "Pinocchio") appeared as a representative. The entity owned 20.83% of the company operated by the same Daes. At that time, the company signed a lucrative public works contract with the city of Barranquilla. [Construseñales Conference 2002 Pg. 2]
Court documents, including details of the confession of the surviving "twins" leader, indicate that Ivan Alvarez "Pinocchio" is managing accounts, doing transactions in Miami, repatriating dirty money and recruiting front-office personnel for the "twins" ( testaferros) tons of cocaine smuggling activities.  His wife Martha Caballero Sierra (Martha Caballero Sierra) is also included as part of the record. [Article. twenty one]
The latest documents from 2020 show that Ricardo Alvarez Iragorri and the wife of "Pinocchio" continue to hold shares in the construction company operated by Daes.
Contact with the Iragoorri family continues. The Colombian document details how Alvarez Iragorri’s sibling Ricardo Alvarez Iragorri and sister Irma Alvarez served as directors of the Panamanian entity Aluminios del Exterior, which held shares in Tecnoglass from at least 2018 until Tecnoglass was delisted from the Colombian Exchange. Colombia's financial documents.
Court documents stated that sister Irma Alvarez Iragorri was carrying out property transactions for drug dealers and buying and selling real estate registered in her name, even though it was purchased by "twins" using drug proceeds. [Article. 3]
Although the extensive ties between Tecnoglass executives and the Alvarez Iragorri family continued until recently, the "Twins" organization basically ended after one of the twins was killed in a gun battle with the Colombian army in April 2008. Another Miguel Mejía Muñera was extradited to the United States in 2009 and sentenced to 14 years in prison.
In 2013, the Daes brothers were investigated by Colombian financial and corporate regulators for trying to manipulate the election of the board of directors of Barranquilla's influential chamber of commerce.
Daes Brothers is accused of setting up 359 straw companies in the names of Tecnoglass employees in order to gain additional voting rights and thereby gain popular candidates.
Colombia’s corporate regulator, the Corporate Supervision Agency, described the creation of hundreds of new companies by Daes as:
"Interfere with, manipulate or distort the election of the Barranquilla Chamber of Commerce's board of directors." [page 5]
Given that Tecnoglass's intricate corporate structure was conducted through Panama and the Cayman Islands, these allegations triggered a separate investigation by the Corporate Regulatory Authority on who ultimately controls Tecnoglass and its subsidiaries CI Energia Solar and ES Windows. 
The company's regulatory investigation did not end until November 2019. The regulator stated that Daes did not clearly disclose their control and beneficial ownership of Tecnoglass and CI Energia Solar-ESWindows, which violated Colombian company law. 
"One of the pillars of the company's legal relationship is the transparency of information to build confidence in the market. Failure to fulfill the obligation to register all the information of the enterprise group has deprived stakeholders of relevant information, including information about the actual controller." [Paragraph . 39]
It is also a specific requirement for companies listed on the Columbia Stock Exchange and the National Register of Securities and Issuers to provide accurate information about the company's ultimate beneficial owners and their controllers. [Page 59]
Due to the five-year statute of limitations, the Company Supervision Bureau could only impose a fine of 33 million pesos (approximately US$10,000 at the time). [Article. 39]
Although the scandal involved the company and its key executives, Tecnoglass went public through SPAC in December 2013.
Accounting irregularities began to appear almost immediately. Before the merger, the auditor of Tecnoglass was Crowe Horwath CO SA. After the merger was completed, Marcum LLP was selected as its auditor. [Article. twenty two]
Four months after the merger of SPAC, in April 2014, the company's first consolidated annual report revealed several "significant weaknesses" in its financial controls, including:
"Identify major, unconventional, unusual or complex events or transactions in a timely manner, including major related party transactions." [Article. 25]
Eight months later, on December 30, 2014, the company fired Marcum LLP as its auditor and appointed PricewaterhouseCoopers, which through its local branch in Colombia, PwC Contadores y Auditores SAS [F-5]
With PricewaterhouseCoopers acting as an auditor, the company reiterated the same types of accounting loopholes and added more specific issues related to related party transactions:
"Major related party transactions require adequate and frequent reconciliation to determine appropriate records in the financial statements." [2015 10-K/A]
By the end of 2016, with the help of its new auditor, PricewaterhouseCoopers, the company reported that it had corrected accounting deficiencies in related party transactions and announced:
"Implement control over the identification, accounting treatment, classification and nature of unconventional and abnormal transactions (including major related party transactions)." [P. twenty four]
Although PricewaterhouseCoopers has approved the company's related transactions, we found evidence that the company conducted a large number of undisclosed related transactions after the management claimed to have rectified the issue.
In documents submitted to the SEC between 2013 and 2016, Tecnoglass disclosed that its largest customer was a local contracting company called GM&P:
"Only one customer, GM&P Consulting and Glazing, accounted for more than 10% of our net sales in 2016 and 2015, and accounted for sales for the years ended December 31, 2016 and December 31, 2015, respectively. 26% and 14% of the amount." [P. 10]
According to public records, Nicolas Abuchaibe is one of the mother's cousins in the Daes family.  According to his LinkedIn profile, he joined GM&P in May 2014 as the chief financial officer, and was quickly promoted to chief financial officer in January 2015.
In Tecnoglass's documents, family relationships do not appear to be disclosed.
Subsequent Tecnoglass documents show that GM&P has a subsidiary called Componenti USA LLC:
"Componenti USA LLC is a subsidiary of GM&P, providing construction expertise in the United States..." [Pg. F-16]
According to Florida company records, Componenti USA LLC was established in February 2015. A document in August 2015 indicated that three parties were added as managers of the entity: (1) Zamka LLC (2) Giovanni Monti and (3) Carlos Amin.
The company record filings for April 2016 and January 2017 also included the same individuals and entities (the same applies for filings as of October 2020). The document did not disclose the details of ownership shares or roles, but only described the three individuals as managers.
According to company records, Carlos Amin and his brother Samir Amin are both managers of Zamka LLC.
Like Carlos Amin detailed above, Samir Amin (Carlos' brother) is also the nephew of Tecnoglass's CEO and COO, according to the same unrelated SEC document detailing this relationship.  According to his LinkedIn profile, Samir Amin has served as Tecnoglass's vice president of operations and logistics since 2006, including his time at Componenti.
Based on their long-term work at Tecnoglass and their social activities, the nephews seem to be closely related to their uncles. Local media in Colombia recorded Christian Daes attending the wedding of his nephew Samir in Barranquilla.
In short, the subsidiary company of Tecnoglass's largest so-called independent customer is managed by the two nephews of the CEO and chief operating officer through an entity based on Tecnoglass's address.
We found other signs of an unusually close customer relationship. According to the company's website at the time, GM&P's sales and operations were completed in its warehouse at 3550 Northwest 49th Street in Miami.
This address is owned by Tecnoglass. According to property records, in December 2014, a Tecnoglass subsidiary named Tecno RE LLC purchased the warehouse subsequently operated by GM&P. [Article. 5]
Many years later, Christian Daes, chief operating officer of Tecnoglass, explained in an interview that it purchased the warehouse to maintain close contact with GM&P. Given the undisclosed family relationship, this relationship seems to be very close.
In March 2017, as part of a $35 million transaction, Tecnoglass acquired 100% of its so-called independent client GM&P, including 60% of GM&P's subsidiary Componenti. [Article. 4] Neither the transaction announcement nor Tecnoglass's subsequent annual report mentions the family relationship with GM&P or the senior leadership of Componenti and Tecnoglass.
Please note that the acquisition of GM&P occurred after the company hired PricewaterhouseCoopers, and the company claimed that it "controlled the identification, accounting treatment, classification and nature of unconventional and unusual transactions (including major related party transactions)." [Article. twenty four]
The export record of Colombian Tecnoglass to the United States shows that in 2021, Componenti's imports from Tecnoglass have increased significantly. According to data from Import Genius, an aggregator of import and export records, these figures have climbed from approximately US$1.5 million in 2020 to nearly US$77 million year-to-date.
The surge seems unusual, especially considering that Componenti looks like a small architectural design company.  According to US Securities and Exchange Commission documents, Tecnoglass still only owns 60% of Componenti. The company did not disclose who owns the other 40%.
This also begs the question of why Tecnoglass is not simply shipped to GM&P (Tecnoglass owns 100% of Componenti's parent company). In contrast, Colombia's exports to GM&P have been declining since 2016 and declined in 2021 according to import and export records.
Given the surge in exports to Componenti, the other 40% of Componenti holders seem likely to benefit greatly from this wave of business.
As part of the research, we also reviewed the import and export records of Tecnoglass and its various other subsidiaries.
Colombia’s export records show that from August 2016 to April 2018, Tecnoglass’s subsidiary “CI Energia Solar” shipped 40 shipments to an entity named Window Design & Installation.
Window Design and Installation, LLC seems to be an empty shell, with no obvious success on Google, LinkedIn or Facebook.
According to Florida company records, the entity was established in March 2016 and registered with Carlos and Samir Amin. According to an inconsequential document from the US Securities and Exchange Commission, the relationship between the two is described in detail, and the two are the nephews of the CEO and chief operating officer of Tecnoglass.
As mentioned earlier, Carlos and Samir Amin were also long-term employees of Tecnoglass.
We discovered further suspicious connections between members of the Daes family and Window Design & Installation, LLC. According to Miami-Dade’s property records, the address listed in the entity’s corporate documents is 10653 Quaybridge Ct, which is a residential address owned by Evelyn Daes-Perez. 
According to the company's filing with the US Securities and Exchange Commission, Evelyn Daes-Perez is the sister of Jose and Christian Daes, CEO and COO of Tecnoglass.
We found it strange that an obvious window company that bought products from Tecnoglass was run in the apartment of the sister of the CEO and COO and run by their nephew.
We decided to visit this address to determine if any construction business is going on outside of this location. The address appears to be entirely a residential area.
The same residential address appeared on Tecnoglass's Florida company registration, further proof of the related party link. Since 2006, the homeowner Evelyn Daes has listed herself as the administrative director of Tecnoglass in her LinkedIn profile and is also the general manager of ES Windows (LLC), a Florida-based affiliate, in Tecnoglass After the acquisition in 2016, it became a subsidiary.
In view of the above factual pattern, people would expect Window Design and Installation to be declared as a subsidiary or related party of the company, but we did not mention it in the company's documents, nor did it appear on Tecnoglass's annual list of subsidiaries. ['20,'19,'19 pt. 2,'18,'17,'16,'15,'14,'13]
The entity’s activities seem to have continued until recently-until January 2021 it was disbanded.
Note again that these transactions occurred after the company hired PricewaterhouseCoopers, and the company claimed to have corrected its major accounting loopholes related to undisclosed related party transactions. [Article. twenty four]
Colombia’s export records show that at least from 2018 to 2021, Tecnoglass’s goods were shipped to another entity called Glass Studio Group LLC.
The GlassStudio website shows that the company sells products from various brands of Tecnoglass: ES Windows, Tecnoglass and GM&P.
The website also shows several large projects that seem to overlap with GM&P projects. However, despite the large number of customers claimed by Glass Studio Group LLC, we did not find the company’s employees on LinkedIn, nor could we find the entity’s contractor license.
GlassStudio does not appear on the list of subsidiaries reported by Tecnoglass, so it seems to exist outside of the company's corporate structure.
In addition to these red flags, we again found signs of the CEO and COO’s nephew in an undisclosed role in the entity. The Glass Studio website shows that the company was founded in 2015.
In February 2015, the entity Glass Studio LLC was established in Florida. Like GM&P, the company is also registered in the same warehouse owned by Tecnoglass's subsidiary Tecno RE LLC, which is located at 3550 NW 49th St. 3]
Also like the subsidiary of GM&P, Glass Studio lists Zamka LLC as the manager of the original entity. According to the Florida company documents, as mentioned earlier, Tecnoglass CEO and COO Carlos and the nephew of Samir Amin are managers of Zamka LLC.
Again, we did not find any disclosure of the relationship between Tecnoglass and Glass Studio.
The entity file later submitted by Glass Studio showed that the company entity appeared to have changed. The Glass Studio LLC entity related to Amin's nephew ceased activity on September 23, 2016 and was replaced by an entity managed by the wife of the GM&P manager. 
In 2019, the Tecnoglass document vaguely mentioned a new “subsidiary” focused on the manufacture of metal facades, called ES Metals. Tecnoglass's 2019 annual report briefly explained ES Metals as “a Colombian entity with a 70% shareholding in the section titled “Establishing a subsidiary”. [Article. F-18]
Tecnoglass's introduction did not fully fit this description, describing the shares of ES Metals as part of the acquisition. From its 2019 "Sustainability Report":
"Another important event that occurred in 2019 was the opening of a new business line through the acquisition of 70% of ES Metals SAS. The company is committed to the design and engineering of aluminum cladding and building envelopes." [P. 12]
The following year, the company's 2020 sustainability report reiterated this point:
Columbia’s company records indicate that the equity has been acquired, but did not provide detailed information about the terms of the arrangement.  According to Colombian company records, ES Metals was incorporated in Barranquilla in December 2018. The majority shareholder is an IT company called Computodo MME, which controls 70%. [Article. 20]
When Tecnoglass acquired the equity, the shareholders of Computodo MME were the five children of Tecnoglass CEO and COO Jose and Christian Daes.
The minutes of the shareholders meeting in November 2018 show that Jose Deiss’s children: David Dess (sic) Montoya, Daniel Dess Montoya, Nicolas Dess Montoya He became the eldest son of Christian Daes with Melissa Des Montoya  and the emergence of Christian Joaquin Des Fernández -everyone owns 20% of the shares. [Article. 4]
The documents show that David, the son of Tecnoglass CEO Jose Daes, has been appointed as the company's legal representative since February 2017. [Article. 4]
There are clear signs that Computodo is one of the 359 straw companies established by the Daes brothers who allegedly manipulated the election of the Barranquilla Chamber of Commerce in July 2012.
Computodo MME was established in February 2012, just a few months before the election. The sole founding shareholder of Computodo is listed as Mirta Marena Esther Ramos Villa.
The Colombian media Herald reported that Mirta Marena Ramos Villa (Mirta Marena Ramos Villa) was one of the Tecnoglass employees under investigation by the Colombian Trade and Commerce Regulatory Agency. He represented the Daes brothers and hundreds of employees. Dealing with a straw company.
Mirta Marena Ramos Villa was also appointed as the company secretary of CI Energia Solar, a subsidiary of Tecnoglass, in Colombian court documents. She opened a separate corporate bank account to handle payments allegedly made by the Cali Cartel to her boss Jose Manuel Daes Check. In the court documents that went to court, she was partly named "Marena Ramos" and (Martha (sic) Ramos) [page 20]
This entity has other obvious connections with Tecnoglass. For example, according to Colombian documents, its first general meeting of shareholders was held in the offices of the Tecnoglass Foundation in Barranquilla. [Article. 3]
All in all, the evidence suggests that Tecnoglass “acquired” its shares from the child of the CEO and COO through the entity that was used as part of the alleged election manipulation scandal. The terms of the transaction were not disclosed in company documents, and it is not clear how much compensation was paid to the children as part of the arrangement.
Whenever we discover that "customers" are secretly affected by insiders who receive a large number of company products, we often question the legitimacy of the company's reported revenue and other indicators. Tecnoglass's balance sheet supports these suspicions.
Tecnoglass's Accounts Receivable Days (DSO) is a key indicator of the company's ability to collect reported income, close to 100 days, almost twice that of industry peers. High, persistent, uncollectible accounts receivable balances can often be a sign of false income, especially when combined with other red flags.
According to FactSet's data, Tecnoglass's historical DSO is even worse, soaring to 147 days in June 2020. We suspect that the company has alleviated some problems during the business wave during COVID. But even in the presence of surges, high-current DSOs indicate a major continuing problem.
In addition to the large number of undisclosed related party transactions that we believe to be undisclosed, we believe that some related party transactions of the company have not been fully and/or appropriately disclosed.
These include major capital expenditures. Although some transactions are mentioned in company documents, they have not clearly stated to investors all the interests or relationships with insiders.
Tecnoglass went public in 2013 and raised a net income of US$22.5 million. [Article. 19] With its listing proceeds, working capital and debt financing, the company has invested heavily in new facilities in Colombia.
According to the company's filing, from 2014 to 2015, Tecnoglass's investment in construction, construction, machinery and equipment was approximately US$137 million. [Article. 44]
The documents submitted by Tecnoglass claim to disclose a summary of “assets, liabilities, and income and expense transactions with all related parties”. [Article. 19]
In contrast, documents from that period appeared to only disclose outstanding balances owed to related companies, such as A Construir SA, a construction company whose “CEO, COO, and other related parties are equity investors”. [Article. F-24] The reported balance accounts for only a small part of the total business volume between related parties.
Please refer to the following example in the June 2015 quarterly report of Tecnoglass, which shows that the balance owed to the related party construction company A Construir is only about 1 million to 3.2 million US dollars:
The company itemized zero related party transactions to A Construir SA at the end of 2014 and 2015, despite the spending spree during this period, which shows that Daes' related party construction company has little to do with expansion.
According to A Construir's online Spanish manual, the construction company completed at least $24 million in work for Tecnoglass between 2014 and 2017.
According to a pamphlet of documents submitted by related parties A Construir and Tecnoglass themselves to the US Securities and Exchange Commission, the amount of work performed through this entity appears to have been underreported by at least $20 million.
A press release issued in December 2016 by Tecnoglass's aluminum manufacturing subsidiary, Alterations, stated that Tecnoglass had spent US$200 million in the past four years to develop the Tecnoglass Industrial Park in Barranquilla. The value of the work carried out by A Construir was not disclosed.
Similarly, the June 2021 news report quoted Christian Daes as saying that Tecnoglass will spend US$18 million to build a new facility in Barranquilla between August and October 2021, but he did not disclose that his own construction company will What role (if any) is played in this work.
In view of the company's large capital expenditures to date, we believe that Tecnoglass should provide investors with a complete account of all the businesses and contracts of its affiliated entities, rather than just a minimum summary of outstanding balances.
In addition to the construction contracts of related parties, Tecnoglass also purchased land from its executives and their nephews.
In January 2019, Tecnoglass announced the establishment of a joint venture with Saint Gobain, a large French construction group, and revealed that it plans to establish a new manufacturing plant to produce float glass. The plant is approximately 20 kilometers away from existing facilities outside of Barranquilla.
As part of its 25.8% stake in the joint venture, Tecnoglass donated a piece of land from a related party, disclosing that it was “previously owned by a family member of our CEO”. [Page 19]
Tecnoglass documents show that the plot is paid for in shares of US$10.9 million. Although the third-party valuation of the property was mentioned, the details of such third-party valuation and the history of the property were not disclosed to investors. [Article. 4]
According to the records of the Colombian Land Registry, the purchase price of this land is almost 10 times the price paid by the Daes brothers and their nephews Carlos and Samir Amin eight years ago, in 2012, for the entire 76 hectare chicken farm. 1] The plot sold to the joint venture company is a subdivision, less than half of the total area. [Contract page. 1] On a per hectare basis, this transaction represents a price increase of nearly 20 times.
Tecnoglass has many things that usually give investors comfort: (i) it is listed on the major US exchange Nasdaq (ii) it has a "big four" auditor (iii) it has a valuation of 1 billion Above USD (iv) its board of directors has "independent" directors, and (v) a professional sell-side analyst is responsible for issuing a "buy" rating.
Sometimes, after our announcement, investors will be surprised to find that any company's checks and balances may suddenly fail. We think Tecnoglass is another example of this type of failure.
A long list of legendary criminal charges involving Jose Daes and Christian Daes (the two pillars of the business) is self-evident.
Although it was important for investors to fully understand Tecnoglass as an investment in the past, we believe that independent auditors should step in to provide the investing public with the much-needed clarity of Tecnoglass's subsidiaries, customers, acquisitions, and capital expenditures.
What needs to be clear is that Tecnoglass has real production facilities and at least some of its products have real end customers. The key issue we have seen is that any legal business the company participates in is obscured by a bunch of opaque entities, related party transactions, and suspicious customer transactions.
Since the Daes family owns approximately 55% of the controlling interest in Tecnoglass, unless withdrawing from the family or giving up control, investors are subject to a management team that we consider to be toxic in any case.
After the collapse of the Cali Cartel in the 1990s, the Daes brothers steadily gained political and economic influence in Barranquilla. Their wealth not only revolves around Tecnoglass and its subsidiaries, but since the late 1990s, their private construction company has been awarded a large number of public works contracts and has been supported by a series of suspected corrupt mayors and local government officials.
The Colombian government portal shows one of the Daes; since 2011, A Construir SA has received at least $190 million in public works contracts, and other companies have obtained other contracts that date back at least to the late 1990s.  The contract includes roads, parks, bridges, police and fire stations, major drainage works, seaports, tourism regeneration projects, and even the construction of a new city hall in Barranquilla.
Any specific contract awarded to A Construir SA does not appear to be immediately marked as corrupt, but many mayors they have worked with were either in jail for corruption during their tenure or are under investigation for corruption.
In 2015, the influential news portal La Silla Vacia called the Daes brothers "an unknown force in the Caribbean" and wrote:
"It's as if they were King Midas, the king in mythology, who turned everything he touched into gold. Everything around the Daes brothers was illuminated by local and national reporters and (political) leaders. Many of them first experienced their generosity-hands."
One of Colombia's leading financial newspapers called Christian Daes "a businessman who turned glass and aluminum into gold." Around this theme, the regional portal Capital Caribe called Christian Daes an "alchemist" and once again praised his ability to turn Tecnoglass into gold.
The leading national daily El Tiempo cited an earlier magazine article that described José Manuel Daes as the “virtual mayor” during the second administration of Bernardo Hoyos (1998-2000) . The report stated that even though Daes was in prison in the capital Bogota at the time, he still gave the orders to the elected mayor about which companies should be awarded public works contracts in Barranquilla.
Hoyos was later sentenced to jail on corruption charges, including signing an illegal contract while in office.
As mentioned earlier, in 2003, José Manuel Daes was shot in the head in a botched assassination attempt in a contract corruption dispute in Barranquilla And neck. Dess was paralyzed.
Despite the failure, the Daes brothers continued to maintain close political ties and won lucrative contracts with the subsequent government.
Approximately US$95 million in contracts-Approximately half of the contracts listed on the government portal were in the second government of Barranquilla Mayor Alejandro Char from 2016 to 2019 Granted during the period, this is part of the most powerful political dynasty in the region of Colombia. Charr has been accused of corruption multiple times during his political career. He served as the mayor of Barranquilla for two terms and the governor of the Atlantic region. He is still under investigation.
In a survey of public contracts issued by Alejandro Char during his tenure as mayor, La Silla Vacia stated that Daes' A Construir SA became the largest single contractor-and won most of the contracts One of only four contractors.
Julio Torres Garcia is one of the initiators of the Blank Check Company that acquired Tecnoglass to Nasdaq, and has been a director of Serfinansa, one of the Char family financial entities, since 2012.
Colombian President Juan Manuel Santos (Juan Manuel Santos) spent US$43 million to build a new factory in September 2015, confirming Daes' high-profile political ties.
In March 2021, as part of the annual summit of the Inter-American Development Bank, the current Colombian President Ivan Duque visited the Tecnoglass factory. In his speech, he only mentioned Christian Daes' name "Dear Christian" and praised him " Do not produce glass but innovate".
Colombian land registry records show that the Hakkazam SA entity located in Barranquilla purchased the property for 2.3 billion COP (approximately US$1.3 million at the time) in September 2012. 
Hakkazam is jointly owned by the Daes brothers through the Panamanian entity Invelco and their nephew Amin Daes brothers.  
The Amin Daes brothers hold senior management positions at Tecnoglass-Samir is the vice president of operations and logistics, and Carlos is the vice president of sales. 
Land records show that the plot of land was transferred to another entity Zofracosta SA in Barranquilla at the same peso price of 2.3 billion pesos (valued at about 1 million U.S. dollars at the time) in 2015.
The transaction was basically just a transfer to another entity held by the same party and controlling entity-Hakkazam SA, Kazam Ltda, Invelco SA, Samir Amin Daes and Christian Daes Abuchaibe.
The subdivision of the original 76 hectare plot was completed in November 2019. Zofracosta, an entity controlled by the Daes and Amin brothers, retains control of the rest.  According to a document published by the Colombian Minister of the Interior, the remaining areas are designated as industrial and business parks in accordance with the new planning zoning rules approved in 2019. [Article. 7]
As a guide to real estate price trends in the region, the government's National Bureau of Statistics (DANE) shows that residential real estate prices in Colombian pesos increased by 45.77% in the eight years from 2012 to 2019. DANE did not publish data on changes in the value of Barranquilla’s commercial or agricultural properties.
But in the same period, the depreciation of the peso against the U.S. dollar will exceed any gains from the peso.
The Colombian peso fell from 1799 pesos to the U.S. dollar on September 25, 2012 (the date when the Daes and Daes Amin brothers purchased the land) to 3810 pesos to the U.S. dollar on October 28, 2020 (the date of land sale). The peso has depreciated 53% against the dollar.
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 In an email response from the Criminal Court that originally tried the case and the Central Archives in Barranquilla, the staff stated that they had no record of Daes' name and could not find the case file. But we found a 22-page document in the paper file of the Tribunal Superior Tribunal that reviewed the case in 2001.
 Miguel Mejía Munera initially participated in a government-led peace agreement with right-wing paramilitary organizations. As part of the so-called peace and justice plan, he acknowledged his criminal associates and his possessions.
 The investigation was conducted under the order of the Bureau of Industry and Commerce (SIC), and was led by the Bureau of Corporate Supervision under the Bureau of Industry and Commerce. The Financial Supervision Bureau under the Ministry of Finance also cooperated.
 In its so-called non-appealable final resolution, the Company Supervision Bureau determined that the Daes brothers violated Article 30 of Law No. 222 of 1995.
 LexisNexis records show that Abuchaibe's full name is Nicolas Abuchaibe Skafi. According to Columbia company records detailing family relationships, his parents are Nicolas Elias Abuchaibe Slebi and Jeanette Skafi. The public obituary confirms that Elias Abuchabe is the brother of Evelyn Abuchabe, the mother of Jose and Christian Dyce, and the wife of Jose Manuel Dyce Sayer . [1,2] Public social activity documents and other social media confirmed that Elias Abuchaibe married Marina Slebi and had a son Nicolas Elias Abuchaibe Slebi, so he was the cousin of the Tecnoglass Daes brothers. [1,2,3] His son is also known as Nicolas Elias (Nicolas Elias), his father's surname is Abu Chabe, and his mother's surname is Skafi. [1,2]
 The sister of the Daes brothers, Giselle, married William Amin Escaf, who was an early investor and shareholder of Tecnoglass. Their two sons are Samir and Carlos Amin Zes. William Amin Escaf is the brother of influential regional politician Miguel Amin Escaf, Miguel Amin Escaf Kraft (Miguel Amin Escaf), a former member of Congress and Senator, is regarded as a close political ally of the powerful Char family.
 Componenti's website does not list any specific employees. We found 5 employees on LinkedIn, most of them seem to have joined as soon as they graduated [1,2,3,4,5]
 According to a search on property records, the import record lists the recipient's address (or "consignee's address") of the shipment as 10695 Quaybridge, which does not seem to exist. However, the Florida entity record of Window Design & Installation LLC clarified that the address was actually 10653 Quaybridge Ct.
 The GlassStudio website refers to an entity called Glass Studio Group LLC. Florida records show that the entity was created at the same address in October 2017 and is under the responsibility of a different manager Irene di Tongo (sic). This entity appears to be closely related to the GM&P leadership. The name of the Glass Studio manager appears to be a spelling error of Irene Di Tondo, which has been listed elsewhere. She also appears to be the same person as Irene Monti, both of whom are listed as directors of another entity, Angelo 1969 Inc.. Monti is the last name of Giovanni Monti, the manager of GM&P. A property search revealed that the couple were husband and wife and shared a Miami address. Florida records do not know who ultimately owns the entity.
 In Colombia’s company records, Tecnoglass used the phrase “perfect the subscription of ES Metals shares”, implying that the shares have been acquired, but indicating that Tecnoglass only controlled the shares from January 2020, not The beginning of 2019 stated in the SEC documents may be due to the delay in updating local records from the date of agreement. [Article. 5-6]
 In 2001, the registration documents of Quattro, a private company owned by one of the Daes brothers, listed the names of Jose Manuel Daes, his wife Victoria Montoya Jaramillo, and their four children David, Daniel, Nicolas and Melissa Daes Montoya.
 Christian Joaquin Daes Fernandez seems to have few traces online. ES Metals’ registration documents show his ID and indicate that he was born in Miami in January 1992. A 2016 media article mentioned that Christian Daes took an unnamed 23-year-old son to visit the Tecnoglass factory-this may correspond to the DOB on his ID card. Dyce later married Carla Garcia and had two other children, Sebastian and Isabella. There is a photo, simply named "your son" on the Daes Twitter feed.
 The USD/COP exchange rate is 0.00033 x 53630000000 (Colombian pesos)
 According to documents from the Barranquilla Chamber of Commerce, Luis Eduardo Barrios Lopez (Luis Eduardo Barrios Lopez) is one of the current business partners of the Daes brothers and took control of A Construir in 2006. By 2010, 94% of the shares had been transferred to Panamanian entities held by nominated directors, and by April 2012, 95.5% of the shares had been transferred in the name of Jose Manuel Deis. According to company documents on December 9, 2013 (11 days before the merger of Tecnoglass SPAC), CI Energia Solar, a subsidiary of Tecnoglass, holds 5.7% of A Construir SA. It is not clear when CI Energia Solar will acquire the shares or when it will be sold. The SEC filings do not seem to disclose that Tecnoglass holds shares in A Construir.
 Sometimes, real estate suppliers or buyers often underestimate the actual purchase price of the real estate in order to avoid paying notarization fees and transfer taxes. However, given that an earlier statement in the record of the shareholder meeting of the supplier company PuroPolla SA stated that they are willing to accept a commercial sales price of more than 2 billion pesos, the 2.3 billion pesos listed in the official document seems to be the exact pesos of the land .
In addition, the notary who handled the 2012 land transaction told us over the phone that both parties are legally obliged to declare the complete commercial sale price. If he doesn't do this, he says it will be a "lie." According to Colombian law, forging details of public documents, including property contracts, is considered a criminal offence and is punishable by more than three years of imprisonment [Art. 288 Colombian Criminal Code. ]
 Hakkazam SA is 50-50 owned by two other entities, Kazam Ltda. It is jointly owned by Carlos Amin Daes and Samir Amin Daes and Invelco SA, and is ultimately controlled by the Daes family through some Panamanian registered entities.
An investigation by the Colombian Securities Regulatory Agency concluded in 2019 that although some of these Panamanian entities were registered in the names of their parents, Christian and José Manuel Daes finally Gained control.
 It purchased the land with the help of a mortgage of unspecified value from the Barranquilla Finance Company Serfinansa SA. The mortgage company Serfinansa is owned by the Char family, which is the most politically powerful dynasty in the region of Colombia. Julio Torres Garcia, co-CEO of Andina Acquisition Corp., the blank cheque company that listed Tecnoglass, was also a director of Serfinansa when paying mortgages to the Daes and Amin Daes brothers.
 The father of Samir and Carlos Amin Daes is Willian Amin Escaf, and his wife is Giselle, sister of José Manuel and Christian Daes. Willian Amin was an early shareholder and director of Tecnoglass and continues to hold shares in the company through the Cayman Islands Energy Holding Company [Pg. 21 SIC investigation]. He is the brother of Miguel Amin Escaf, who has participated in the Colombian Congress as a member of the House of Representatives since 2006 and later served as a senator. He is considered a close political ally of the Char dynasty.
 In December 2018, before selling the 34 hectares of land to Saint Gobain Joint Venture, two other shareholders bought shares in the then land owner Zofracosta – Silvana Cure Daes (nearly 13%) and Tecnoglass Inc. subsidiary CI Energia Solar (4%).