The downfall of Gowex—a company once heralded as a Spanish tech success story—has raised concerns about the strength of some the country's companies, especially those on the alternative stock exchange.
Gowex's collapse in bankruptcy was instigated by damning analysis by U.S. short-seller Gotham City Research. Published last week, its report put the value of Gowax shares at 0.00 euros and alleged that over 90 percent of the company's reported revenues did not exist.
Gowex, which provides free wifi services in cities, filed for bankruptcy on Sunday after its founder and ex-CEO Jenaro Garcia Martin resigned.
"An outsider, such a Gotham, was able just to look at the published accounts, using public information, and spot unusual trends and ratios that didn't make sense," Fernando Penalva, professor of accounting and control at the IESE Business School in Barcelona, told CNBC. "If they were able to do it, why was no one else paying attention?"
Gowex isn't the only Spanish corporate to be hit by accounting irregularities recently. Pescanova, a multinational fishing company, was forced to seek bankruptcy protection last year after its real debt level was revealed to be billions of euros higher than it reported.
"This came as a surprise—it's a large company, it's listed and had a good auditing firm. It's surprising they managed to get away with it for so long," Penalva added.
'Weak regulatory oversight'?
For some, the troubles at these two companies are symptomatic of a wider problem in Spain that goes to the very heart of the Spanish government, led by Prime Minister Mariano Rajoy.
"That Gowex was not just a darling of the Spanish equity markets but was also lauded by Spanish politicians and regulators as a high-tech success story is deeply embarrassing for the Rajoy government, the stock market regulator and the accounting watchdog," Nicholas Spiro, managing director of Spiro Sovereign Strategy, told CNBC. "Serious questions need to be answered."
Spiro highlighted the case of , which was forced to accept over 20 billion euros ($27.2 billion) of European aid after clocking up massive losses as a result of the country's dramatic property crash. Over 30 Bankia board members were investigated over allegations of fraud, price-fixing and falsifying accounts at the lender.
"Weak regulatory oversight contributed to Spain's financial crisis and is evidently still a problem, despite the fact that Spain has been under intense external scrutiny over the past several years," Spiro added.
"One would have hoped that the collapse of Spain's housing bubble, and the ferocious criticism of Spanish banking and stock market regulators that ensued, would have put an end to these kind of scandals Unfortunately this is not the case."
Before its shares were suspended, Gowex was listed on Spain's alternative stock exchange, the Mercado Alternativo Bursatil (MAB).
The company had come to be seen as something of tech star, with its share price rising around 25 percent between January and its peak in April. However, after Gotham City's report on July 1, its stock plunged close to 60 percent – pulling a number of other MAB-listed companies lower with it.
In a statement on its website, published before it filed for bankruptcy on Thursday, Gowex said it was preparing a response to Gotham City's "baseless allegations".
The MAB, meanwhile, insisted that "grave irregularities" at Gowex should not cast doubt on the index, which it said was "indispensable" to the Spanish financial system. In response to Gowex's downfall, Spain's financial regulator, the CNMV, said it was looking at revising the way it monitored MAB companies and would assess whether other firms on the index had been engaged in similar market abuse.
But Predrag Dukic, senior equity sales trader at CM Capital Markets in Madrid, told CNBC there was no doubt the saga had done "significant damage" to both the MAB and Spain's stock markets more broadly.
"Quite a few companies (have announced) they are going to leave the MAB. No doubt, once the credibility is lost, it is very difficult to recover it," he added.
Dukic stressed, however, that although Gowex's accountancy irregularities were able to go unnoticed on the MAB, this situation was unlikely to occur at one of Spain's international blue chips. Companies like Banco Santander, BBVA and Telefonica, for instance, have to obey international accounting standards and are audited regularly.
"At the end of the day, less-regulated markets such as the MAB depend on the integrity of individuals running the firms. As long as there is an incentive to cheat, there will be cheaters," Dukic said.
—By CNBC's Katrina Bishop