Globant SA GLOB
Globant is a poorly organized digital-IT roll-up using accounting games and Luxembourg disclosure loopholes to mask decelerating organic growth; shares warrant 40-50% downside to $24.50-$29.50.
Thesis
Spruce Point argues Globant is a digital-IT outsourcing roll-up earning the sector's highest multiple by selling investors a phantom 20% organic growth story. Their forensic work shows almost half of 2017 growth came from acquisitions, with true organic growth decelerating from 21.6% in 2015 to 14.8% in 2017, while adjusted EBITDA of $64.6m converted to a paltry $7.4m of free cash flow and the company quietly generated $68m of cash from trading securities. Inconsistent add-backs, three different versions of FY2016 results, and a quietly revised 4Q16 EPS that turned a beat into a $0.04 miss reinforce the accounting-games narrative. Founders have sold or transferred over $80m (70%+ of holdings) since the 2014 IPO using Luxembourg foreign-private-issuer exemptions and Uruguayan trusts, while WPP/Sir Martin Sorrell sit atop the cap table and a related-party revenue stream. A peer regression implies $24.50-$29.50, or 40-50% downside.
SCQA
Globant is a Luxembourg-domiciled digital IT outsourcing firm trading at peak multiples (30.9x 2018E EBITDA, 19.7x P/E) on a story of consistent 20%+ organic revenue growth and best-in-class digital exposure.
Forensic analysis shows almost half of 2017 growth came from M&A, organic growth is decelerating, adjusted EBITDA does not convert to cash, financials are restated repeatedly, and founders have unloaded $80m+ behind opaque Luxembourg disclosure rules.
Spruce Point is short and urges investors to recalibrate Globant's valuation to IT-outsourcing peers using a regression on organic growth versus EV/EBITDA and EV/Sales multiples.
Re-rating to peer-implied multiples points to a target price of roughly $24.50 to $29.50 per share, equating to 40% to 50% downside from the $49 reference price.
The three reasons
- 1
Roll-up masquerading as organic: ~47% of 2017 growth came from M&A, organic decelerating to 14.8%
- 2
Adjusted EBITDA of $64.6m in 2016 produced just $7.4m of FCF; cash actually comes from trading securities
- 3
Founders sold/transferred over $80m (70%+ of holdings) since IPO, hidden by foreign-private-issuer status
Primary demands
- Investors should re-rate GLOB in line with IT outsourcing peers
- Globant should disclose related-party WPP revenue and improve insider-selling transparency
- Establish a genuinely independent board rather than relying on Luxembourg foreign-private-issuer exemptions
KPIs cited
Pattern membership
Precedents cited
- Luxoft (LXFT) penalized for revenue/EPS misses
Composition what's on the 40 slides
Slide gallery ·
Notes
Classic Spruce Point short-report template: cinematic cover slide, full legal disclaimer, executive summary that bullets the short thesis, then sections on accounting forensics, insider selling, governance, peer comparison, and a price-target table with optimistic/regression/low scenarios. Core rhetorical moves: (1) reframe organic growth attribution to expose roll-up; (2) decompose adjusted EBITDA-to-FCF gap; (3) document insider exit via Luxembourg/Uruguayan trust structure that escapes SEC Form 4 disclosure; (4) link target to a topical scandal (WPP/Sorrell investigation breaking the day before). Regression-to-peer-multiple is the valuation mechanism rather than DCF. No named human author — credited to Spruce Point Capital Management LLC.