Initial Disclosure: After extensive research, we have taken a short position in shares of Tecnoglass, Inc. This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report.
Tecnoglass is a manufacturer of architectural glass, windows, and associated aluminum products. The company was founded in 1984 by José Daes and Christian Daes, who continue to serve respectively as CEO and COO and directors to this day. [Pg. 15, Slide 3] The Daes’, along with family members, own ~55% of Tecnoglass’ outstanding shares though an entity called Energy Holding Corporation. [Pg. 22]
The company was founded, and is still headquartered in, Barranquilla Colombia, where it operates a 2.7 million square foot manufacturing facility. The location offers inexpensive labor and close access to its U.S. operations and distribution center in Miami, Florida. [Pg. 7] [Pg. 4]
Tecnoglass’ stock is up 390% year to date on record sales and EBITDA numbers that have fueled multiple expansion. The company trades at 9.1x LTM EV/EBITDA (versus a 5.4x multiple in the same September period last year), according to FactSet.
The company took the recent growth surge as an opportunity to reduce leverage. Tecnoglass now has $69 million in cash & equivalents and a net debt to LTM EBITDA ratio of 0.9x, a reduction from 2.2x in the same period last year. It also recently raised its dividend yield to an annualized rate of about 0.8%.
The company’s fundamental growth was largely fueled by a U.S. residential pandemic-induced real estate boom. In the most recent quarter, sales to single family residential projects represented ~46% of total sales, versus 18% during the same period last year. [Pg. 19]
According to U.S. census data, new residential Florida building permits peaked in August and have dropped 28% from highs, signaling a headwind for Tecnoglass’ major growth market going forward.
In short, Tecnoglass operates in a cyclical industry that has likely peaked, which we would expect to result in eroding fundamentals and multiple contraction even when taking the reported financials at face value.
As we detail in Part II, we have serious doubts about the company’s reported metrics, with management’s history serving as a guide to Tecnoglass’ present situation.
When reviewing management’s track record, we identified several issues we would characterize as red flags.
The Colombian city where Tecnoglass is headquartered, Barranquilla, has been regarded as a regional hub for drug trafficking and money laundering, first with the marijuana boom of the 1970s and later with the cocaine trade in the 1980s. The city was controlled initially by criminal cartels and later by right-wing paramilitary militias.
A study published by the University of the Caribbean in Barranquilla concludes:
“One can state that in Barranquilla there is a connection between narco-trafficking, paramilitary militias and the political classes. The first two groups negotiate with the other and vice-versa.” [Pg. 7]
In 1996, twelve years after the founding of Tecnoglass’ predecessor entity, its founders Jose and Christian Daes (current directors and CEO & COO, respectively), were part of a group charged by U.S. DoJ prosecutors with trafficking more than 200 tons of cocaine into the U.S., smuggling semi-auto and automatic weapons back to Colombia, and laundering money for the Cali cartel. [Pg. 166] The indictment listed them among “Managers and Operators” of what it called the Cali cartel “racketeering enterprise”. [Pgs. 15, 20]
The range of racketeering charges brought by the DoJ alleged that the Daes brothers were part of a group that smuggled cocaine to the U.S. from Colombia by concealing it in building products such as lumber and concrete, or packed among frozen broccoli. [Pgs. 112, 117, 121, 165]
The charges also specifically alleged that Christian Daes (aka Cristian Daes) smuggled semi-automatic and automatic weapons for the cartel back from Miami to Colombia.
An affidavit from one of the lead investigators in the case gave evidence on how Tecnoglass’ current CEO and Director José Manuel Daes – who used the alias “Yuyo” – advised cartel capos Gilberto and Miguel Rodriguez-Orejuela on how to conceal cocaine in shipments of frozen vegetables sent from Central America to Miami. [Pgs. 20 and 21]
A penalty sheet in the indictment shows Tecnoglass COO Christian Daes faced 3 counts with a maximum penalty of life imprisonment, along with a maximum 20-year money laundering penalty.
The indictment also details how Daes allegedly received money from the cartel’s main U.S. liaison in order to purchase and transport machine guns back to Cali Colombia.
Around 1999, José Manuel Daes was separately charged by Colombian authorities over allegations of illicit enrichment due to additional links with the Cali cartel. He was held in prison but later released on the orders of a judge in his hometown Barranquilla and eventually cleared of the charges. 
According to filings in that case, Daes was accused of receiving up to U.S. $1 million in payments from the Cali cartel capos between 1990 and 1994 – part of the period the separate U.S. indictment alleged he was helping smuggle cocaine and laundering money for the Cali cartel. [Pgs. 2, 11]
Per court records, checks were paid to Energia Solar, the predecessor entity and current subsidiary of Tecnoglass. [Pg. 1] Some of the checks were issued from an account by one of the Cali cartel´s front companies that was specifically used by the drug lords to bribe politicians and to fund political campaigns. [Pg. 20]
Daes´ defense argued that the payments were legitimate business receipts for sales of glass and windows to Cartel capos, the Rodriguez Orejuela brothers, and also included $65,000 of luxury clothing sold to the drug lords from the store the Daes’ ran in Miami until about 1993.
In their defense against illicit enrichment charges, Daes and his legal team admitted they were running double book-keeping, arguing that it was not to launder money for the cartels, but rather to evade sales tax (value added tax) payments. [Pg. 5, 18]
Included at the end of the case file is a five-page letter by one of the three Upper Tribunal judges who disagreed with the decision to clear Daes. The judge stated that the case failed to take into account that Daes had already been indicted by U.S. courts in 1996 on multiple counts of cocaine smuggling and money laundering for the Cali cartel and that documents had been seized from Miguel Rodriguez Orejuela referencing those charges against Daes. The judge accused the investigation of a “lack of critical thinking and naivety”. [Pg. 17]
The judge stated:
“Even though one could not conclude from those documents (seized from Rodriguez Orejuela) that Daes was actually involved in drug trafficking activities, one could deduce that their relationship was much broader than a simple (legitimate) business relationship.” [Pg. 19]
The judge´s letter also briefly references evidence presented at the original trial that Daes may have used some of the Cali cartel payments to finance the political campaign to elect Bernardo Hoyos as mayor of Barranquilla (serving from 1992-1994). [Pg.21]
Despite the seriousness of the charges and despite the specific evidence involving the Daes brothers, the charges against Christian Daes were dropped while those against Jose Daes were handled in confidential proceedings. The court records concerning their cases are mostly sealed making it difficult to say exactly what the judge concluded.
A May 2006 court order clarified that Jose Daes was no longer considered a fugitive and that the “case was disposed of”. A separate June 2011 court order indicated that the indictment against Christian Daes had been previously dismissed.
Local Colombian media speculated that the records may have been sealed to protect cooperating witnesses or collaboration with the justice system, though Daes’ lawyers denied they cooperated with authorities.
Colombian media described Tecnoglass CEO José Manuel Daes as the “virtual mayor” during the second administration 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.
Former Mayor Hoyos was later sentenced to prison on charges of corruption, including signing illegal contracts during his time in office. Another Daes´ company, Construsenales, was awarded lucrative public works contract by Hoyos which remain in place to this day.
In 2004, during the time when José Manuel Daes was still considered a fugitive in the U.S., he was shot in the head and neck in Colombia during a botched assassination attempt.
The attack, which left him paraplegic, was later attributed to a right-wing paramilitary warlord who went by the alias “Jorge 40” in a dispute with Daes and Barranquilla´s then-mayor Guillermo Hoenigsberg (2004-2007). Per local media, the outlaw paramilitary chief believed Hoenigsburg was giving too many contracts to Daes rather than to his own front men and sought to eliminate Daes as competition.
Hoenigsberg was later convicted of corruption, and was sentenced to 9 years in prison.
The collapse of the Cali Cartel through U.S. and Colombian prosecution efforts opened the door for new drug lords to fill the leadership gap in Barranquilla, where Tecnoglass is based.
As part of peace talks that took place with drug lords around 2005, court records describe the “Twins’” Barranquilla-headquartered operations:
“Between 1994 and 2000, the ‘Twins’ criminal organization shipped around 56,000 kilos (56 tons) of cocaine to different countries in the world, most of which was obtained from various paramilitary units…and then transferred to warehouses in Barranquilla before being shipped out” [Pg. 40]
The same records, along with local media reports, detail how the “Twins’” money laundering activities were fronted through a local Barranquilla family named the Alvarez Iragorri family. At least three of the five Alvarez Iragorri siblings were engaged in drug trafficking-related activities, according to the court records which include direct confessions from one of the “Twins”. [Pgs. 3, 5-6, 20-22]
One of the siblings in the family, Ricardo Javier Alvarez Iragorri, shows up as one of the early investors in Tecnoglass from at least 1998—just after the prosecution of the Cali cartel members and in the midst of the rise of the “Twins” cartel—with an almost 5% stake.
From 2000, the same sibling, Ricardo Iragorri, also appears as a 10% shareholder in a Daes-operated company that produces and manages street signs and traffic lights; a related-party entity to Tecnoglass called Construimos y Señalizamos Ltda (“Construseñales”). [Construseñales shareholder records Pg. 10]
Two years later, the wife of another sibling, Ivan Alvarez Iragorri (alias “Pinocchio”) appears as the representative for an entity that owns 20.83% of that same Daes-operated company, which by then had a lucrative public works contract from Barranquilla City Hall. [Construseñales General Assembly 2002 Pg. 2]
Court documents, including details of a confession from the surviving “Twins” leader, stated that Ivan Alvarez “Pinocchio” was running the accounts, doing deals in Miami, repatriating dirty money and recruiting front men (testaferros) for the “Twins” multi-ton cocaine trafficking operation.  His wife, Martha Caballero Sierra, is also named as part of the records. [Pg. 21]
The most recent documents from 2020 show that Ricardo Alvarez Iragorri and the wife of “Pinocchio” continue to hold their stakes in the Daes-operated construction company.
The links with the Iragorri family continue. Colombian filings detail how Alvarez Iragorri siblings Ricardo Alvarez Iragorri and sister Irma Alvarez have served as directors of a Panama-based entity called Aluminios del Exterior which held a stake in Tecnoglass from at least 2018 until the time Tecnoglass delisted from the Colombian exchange, according to Colombian financial filings.
Court documents state that sister Irma Alvarez Iragorri was fronting property transactions for the drug mob, and buying and selling real estate registered in her name even though it had been purchased by the “Twins” using drug proceeds. [Pg. 3]
Despite the extensive links between Tecnoglass’ executives and the Alvarez Iragorri family, which have continued through to recent times, the “Twins” organization essentially ended when one of the twins was killed in an April 2008 in a gun battle with the Colombian military. The other, Miguel Mejía Muñera, was extradited to the U.S. in 2009 and sentenced to 14 years in prison.
In 2013, the Daes brothers came under investigation by Colombian financial and corporate regulators for attempting to rig elections for the board of Barranquilla´s influential Chamber of Commerce.
The Daes brothers were accused of setting up 359 straw companies in the names of Tecnoglass employees in an effort to gain additional voting rights and thus getting their favored candidates elected.
Colombia´s corporate regulator, the Companies Superintendency, described the creation of hundreds of new companies by the Daes as an effort to:
“Interfere with, manipulate or distort the election of the board of directors of the Chamber of Commerce of Barranquilla.” [Pg.5]
The allegations triggered a separate investigation by the Compànies Superintendency about who ultimately controlled Tecnoglass and its subsidiaries, CI Energia Solar and ES Windows, given that its convoluted corporate structure was routed through Panama and the Cayman Islands. 
The Companies Superintendency investigation did not conclude until November 2019, with regulators stating that the Daes´ had not clearly disclosed their control and beneficial ownership of Tecnoglass and CI Energia Solar-ESWindows, in violation of Colombian corporate laws.
“One of the pillars of the legal relationship for corporations is the transparency of information in order to generate confidence in the markets. The lack of fulfilment of its obligation to register the full details of the corporate group deprived interested parties of relevant details, including that about the real controlling parties.” [Pg. 39]
Providing accurate information about the ultimate beneficial owners of a company and those who control it is also a specific requirement for companies listed on the Colombian stock exchange and in the National Register of Securities and Issuers. [Pg.59]
Due to a five-year statute of limitations, the Companies Superintendency was only able to impose a fine of 33 million pesos (about U.S. $10,000 at the time). [Pg. 39]
Despite the scandals embroiling the company and its key executives, Tecnoglass went public in December 2013 via SPAC.
Accounting irregularities began to appear almost immediately. Prior to the merger, Tecnoglass’ auditor was Crowe Horwath CO S.A. Upon consummation of the merger, Marcum LLP was selected as its auditor. [Pg. 22]
Four months after the SPAC merger, in April 2014, the company’s first post-merger annual report revealed several “material weaknesses” in its financial controls, including:
“Timely identification of significant, non-routine, unusual, or complex events or transactions, inclusive of significant related party transactions”. [Pg. 25]
Eight months later, on December 30, 2014, the company dismissed Marcum LLP as its auditor and appointed PwC, which audits the firm through its local Colombian branch, PwC Contadores y Auditores S.A.S. [F-5]
With PwC as its auditor, the company reiterated the same categories of accounting weakness, and added more specific troubles regarding related party transactions:
“Significant related party transactions require adequate and frequent reconciliation in order to determine the appropriate recording in the financial statements.” [2015 10-K/A]
By the end of 2016, with the help of its new auditor PwC, the company reported that it had remedied its accounting weaknesses with respect to related party transactions, declaring that it had:
“Implemented controls over the identification, accounting treatment, classification and nature of non-routine, unusual transactions, inclusive of significant related party transactions.” [Pg. 24]
Despite the signs of approval from PwC regarding the company’s related party transactions, we found evidence suggesting that the company engaged in numerous undisclosed related party transactions after management claimed to have remediated the issue.
In SEC filings 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% or more of our net sales during 2016 and 2015 with 26% and 14% of sales during the year ended December 31, 2016 and 2015, respectively.” [Pg. 10]
Nicolas Abuchaibe is one of the Daes´ cousins on the mother´s side of the family, according to public records. He joined GM&P as financial controller in May 2014 and rose quickly to become CFO by January 2015, according to his LinkedIn profile.
The family relationship does not appear to have been disclosed at any point in Tecnoglass’ filings.
Subsequent Tecnoglass filings revealed that GM&P had a subsidiary named Componenti USA LLC:
“Componenti USA LLC, a subsidiary of GM&P that provides architectural specialties in the US…” [Pg. F-16]
Componenti USA LLC was formed in February 2015, according to Florida corporate records. An August 2015 filing showed three parties were added as managers to the entity: (1) Zamka LLC (2) Giovanni Monti and (3) Carlos Amin.
Corporate records filings in April 2016 and January 2017 similarly include the same individuals and entities (as do filings through October 2020). The filings do not reveal the specifics of ownership stakes or roles, just describing the 3 as managers.
According to corporate records, Carlos Amin, and his brother Samir Amin are both managers of Zamka LLC.
As with Carlos Amin detailed above, Samir Amin (Carlos’ brother) is also the nephew of the CEO & COO of Tecnoglass, according to the same unrelated SEC filing detailing the relationship. Samir Amin has served as VP of Operations and Logistics at Tecnoglass since 2006, according to his LinkedIn profile, which also would include his time at Componenti.
The nephews appear to be close to their uncles, based on both their long-time employment at Tecnoglass along with their social activity. Local Colombian media has documented Christian Daes attending the wedding of his nephew Samir in Barranquilla.
In short, the subsidiary of Tecnoglass’ largest supposedly independent customer was managed by two nephews of the CEO & COO through an entity based out of Tecnoglass’ address.
We found other signs of an unusually close customer relationship. GM&P’s sales and operations were run out of a warehouse at 3550 NW 49th street, Miami, according to the company’s website at the time.
Years later, Tecnoglass COO Christian Daes explained in an interview that it had purchased the warehouse to help stay close to GM&P. Given the undisclosed familial ties, the relationship already seemed quite close.
In March 2017, Tecnoglass acquired a 100% interest in its supposedly independent customer GM&P as part of a $35 million deal, which included a 60% stake in GM&P’s subsidiary Componenti. [Pg. 4] Neither the deal announcement nor Tecnoglass’ subsequent annual report made any mention of the familial relationship with GM&P or Componenti and Tecnoglass’ senior leadership.
Note that the acquisition of GM&P took place after the company hired PwC and after the company claimed to have “implemented controls over the identification, accounting treatment, classification and nature of non-routine, unusual transactions, inclusive of significant related party transactions.” [Pg. 24]
Export records from Tecnoglass Colombia to the United States show that in 2021, Componenti’s imports from Tecnoglass have seen a massive surge. The figures climbed from ~$1.5 million in 2020 to almost $77 million year to date, according to import/export records aggregator Import Genius.
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The surge appears unusual, especially given that Componenti seems like a small architectural design firm. According to SEC filings, Componenti is still only 60% owned by Tecnoglass. The company does not reveal who owns the other 40%.
This also begs the question of why Tecnoglass doesn’t simply ship to GM&P (the parent entity of Componenti that Tecnoglass owns 100% of). For comparison, Colombian exports to GM&P have been on the decline since 2016 and cratered in 2021, according to import/export records.
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Given the surge in exports to Componenti, it would seem the holders of the other 40% of Componenti may be benefitting substantially from this wave of business.
As part of our research, we also reviewed import/export records from Tecnoglass and its various other subsidiaries.
Colombian export records show 40 shipments from a Tecnoglass subsidiary “C I Energia Solar” going to an entity called Window Design & Installation from August 2016 to April 2018.
The entity was formed in March 2016, according to Florida corporate records, and was registered to Carlos and Samir Amin. The two are nephews of the CEO & COO of Tecnoglass, according to an unrelated SEC filing detailing the relationship.
As noted earlier, Carlos and Samir Amin have also served as long-time employees of Tecnoglass.
We found further suspicious links between Daes family members and Window Design & Installation, LLC. The address listed on the corporate filings for the entity is 10653 Quaybridge Ct, a residential address owned Evelyn Daes-Perez, according to Miami-Dade property records. 
Evelyn Daes-Perez is the sister of Tecnoglass’ CEO & COO Jose and Christian Daes, according to the company’s SEC filings.
We found it odd that an apparent window company purchasing product from Tecnoglass was operating out of the apartment of the CEO & COO’s sister and was being run by their nephews.
We decided to visit the address to check with certainty whether any construction business was being conducted out of the location. The address appeared to be entirely residential.
The same residential address appears on Tecnoglass’ Florida corporate registration, further demonstrating the related-party links. The homeowner Evelyn Daes lists herself as Tecnoglass administrative director since 2006 on her LinkedIn profile and general manager at ES Windows (LLC), a Florida-based related party which became a subsidiary after Tecnoglass purchased it in 2016.
Given the above fact pattern, one would expect Window Design and Installation to be declared a subsidiary or related party of the company, but we found no mention of it in the company’s filings and it does not appear on Tecnoglass’ annual subsidiary lists. [‘20,’19,’19 pt. 2,’18,’17, ’16, ‘15, ‘14, ‘13]
The activities of the entity appear to have been ongoing until recently—it was only dissolved in January of 2021.
Note once again that these transactions took place after the company hired PwC and after the company claimed to have remedied its material accounting weakness regarding undisclosed related party transactions. [Pg. 24]
Exports records from Colombia show shipments from Tecnoglass going to another entity called Glass Studio Group LLC, from at least 2018 to 2021.
GlassStudio’s website shows that the company sells products from Tecnoglass’ variety of brands: ES Windows, Tecnoglass and GM&P.
The website also shows multiple large projects that seem to overlap with GM&P’s projects. But despite the number of claimed customers for Glass Studio Group LLC, we found no employees for it on LinkedIn and were unable to locate a contractor’s license for the entity.
GlassStudio appears nowhere on Tecnoglass’ reported subsidiary list, and therefore seems to exist outside of the company’s corporate structure.
Beyond these red flags, we once again found signs of undisclosed roles at the entity by the nephews of the CEO & COO. The website for Glass Studio shows the company was created in 2015.
In February 2015, the entity Glass Studio LLC was formed in Florida. Like GM&P, the company was also registered to the same warehouse owned by Tecnoglass subsidiary Tecno RE LLC, located at 3550 NW 49th St. [Pg. 3]
Also like GM&P’s subsidiary, Glass Studio listed Zamka LLC as a manager of the original entity. As detailed earlier, the nephews of Tecnoglass’ CEO & COO, Carlos and Samir Amin, were managers of Zamka LLC, according Florida corporate filings.
Once again, we found no disclosure of any related party connection between Tecnoglass and Glass Studio.
Later entity filings for Glass Studio show what appears to have been a corporate entity shift. The Glass Studio LLC entity associated with the Amin nephews went inactive on September 23, 2016, and was replaced by an entity managed by the wife of GM&P’s manager.
In 2019, Tecnoglass’ filings make vague reference to a new “subsidiary” focused on metal façade fabrication, called ES Metals. Tecnoglass’ 2019 annual report briefly explained under a section titled “Formation of a subsidiary” that ES Metals is “a Colombian entity in which the Company has a 70% equity interest”. [Pg. F-18]
Tecnoglass’ presentations don’t quite line up with that characterization, describing the ES Metals stake as being part of an acquisition. From its 2019 “Sustainability Report”:
“Another important event that occurred during 2019 was the opening of a new business line through the acquisition of a 70% stake in the company ES Metals S.A.S., dedicated to the design and engineering of aluminum cladding and building enclosures.” [Pg. 12]
The following year, the company’s 2020 sustainability report reiterated this:
Colombian corporate records suggest the stake was acquired, without providing details on the terms of the arrangement. ES Metals was incorporated in Barranquilla in December 2018, according to Colombian corporate records. The majority owner was an IT company called Computodo MME that controlled 70%. [Pg. 20]
At the time the stake was acquired by Tecnoglass, Computodo MME´s shareholders were five children of Tecnoglass’ CEO & COO, Jose and Christian Daes.
The minutes from a shareholders meeting in November 2018, show Jose Daes´ children: David Daez (sic) Montoya, Daniel Daes Montoya, Nicolas Daes Montoya and Melissa Daes Montoya as well as Christian Joaquin Daes Fernandez, who appears to be Christian Daes eldest son – all owned equal 20% shares. [Pg. 4]
Tecnoglass CEO Jose Daes’ son David had been appointed legal representative at the company since February 2017, filings show. [Pg. 4]
There are clear signs that Computodo is one of 359 straw companies that the Daes brothers allegedly set up in an effort to rig the July 2012 elections for the Barranquilla Chamber of Commerce.
Computodo MME was incorporated in February 2012, just months before the elections. The sole founding shareholder of Computodo is listed as Mirta Marena Esther Ramos Villa.
Colombian media outlet El Heraldo reported that Mirta Marena Ramos Villa was one of the Tecnoglass employees under investigation by Colombia´s Trade and Commerce Superintendency for fronting hundreds of straw companies on behalf of the Daes brothers.
Mirta Marena Ramos Villa was also named in Colombian court documents as the company secretary of Tecnoglass subsidiary C.I Energia Solar who opened a separate company bank account to process checks allegedly paid by the Cali cartel to her boss Jose Manuel Daes. In the Upper Tribunal court documents, she is partially named both as “Marena Ramos” and (Martha (sic) Ramos” [Pg. 20]
The entity had other obvious links to Tecnoglass. For example, its inaugural shareholder assembly was held at the Tecnoglass Foundation offices in Barranquilla, according to Colombian filings. [Pg. 3]
All told, the evidence shows that Tecnoglass “acquired” its stake from the children of the CEO & COO through an entity used as part of an alleged election rigging scandal. The terms of the deal are not disclosed in company filings, and it is unclear what remuneration if any had been paid to the children as part of the arrangement.
Anytime we find ‘customers’ secretly influenced by insiders that receive large amounts of company product, we tend to question the legitimacy of a company’s reported revenue and other metrics. Tecnoglass’ balance sheet bolsters these suspicions.
Tecnoglass’ days sales outstanding (DSO), a key measure of a company’s ability to collect its reported revenue, is almost 100 days, nearly double its industry peers. High, persistent, uncollectible receivables balances can often be a sign of fake revenue, especially when coupled with other red flags.
The historical DSOs for Tecnoglass were even worse, soaring to as high as 147 days in June 2020, according to FactSet. We suspect that the company mitigated some of the problem amidst the wave of business during COVID. But even with the surge, the large current DSO suggests a significant ongoing issue.
Beyond what we believe are numerous undisclosed related party transactions, several related party transactions by the company strike us as not fully and/or properly disclosed.
These include major capital expenditures where the full benefit or relationship to insiders was not made clear to investors despite some reference to the deals in company filings.
Tecnoglass went public in 2013, raising $22.5 million in net proceeds. [Pg. 19] With its go-public proceeds in hand, along with operating capital and its debt facility, the company invested heavily in new facilities in Colombia.
From 2014-2015, Tecnoglass spent ~$137 million on investments in buildings, construction, machinery and equipment, per company filings. [Pg. 44]
Tecnoglass’ filings from the time claim to disclose a summary of “assets, liabilities, and income and expense transactions with all related parties”. [Pg. 19]
Instead, filings from that period seem to only disclose outstanding balances owed to related party companies such as A Construir S.A, a construction company where the “CEO, COO and other related parties are equity investors”. [Pg. F-24] The reported balances represent only a small portion of the total picture of business between the related parties.
See an example below from Tecnoglass’ June 2015 quarterly report, showing balances of only about $1 million to $3.2 million owed to related party construction company A Construir:
The company itemized exactly zero related party transactions to A Construir S.A. as of year-end 2014 and 2015, despite the spending spree during that period, suggesting that the Daes’ related party construction company had little if anything to do with the expansion.
According to an online Spanish language brochure for A Construir, the construction company has done at least $24 million in work for Tecnoglass between 2014 and 2017.
Based on the brochure from related party A Construir and Tecnoglass’ own SEC filings, it appears the volume of work performed through the entity was underreported by at least $20 million.
A December 2016 press release by Tecnoglass’ aluminum making subsidiary Alutions stated that Tecnoglass had spent $200 million developing the Tecnoglass industrial park in Barranquilla over the previous four years. There was no disclosure about value of work A Construir had carried out.
Likewise, a June 2021 news report quoted Christian Daes saying Tecnoglass would spend $18 million on new facilities in Barranquilla between August and October 2021 but he did not disclose what role, if any, his own construction company would be playing in the work.
Given the company’s extensive capital expenditures in its history to date, we believe Tecnoglass should give investors a full accounting of all business and contracts to its related party entities, not just minimal summary outstanding balances.
Beyond related party construction contracts, Tecnoglass has also bought land from its executives and their nephews.
In January 2019, Tecnoglass announced a joint venture with major French construction conglomerate Saint Gobain, revealing plans to build a new manufacturing plant to produce floated glass. The plant is located about 20km away from its existing facilities outside of Barranquilla.
Tecnoglass’ filing shows that the plot was paid for with $10.9 million in shares. Despite mention of a third-party valuation on the property, neither the details of such a third-party valuation nor the history of the property were disclosed to investors. [Pg. 4]
According to Colombian land registry records, the purchase price for the land was almost 10x the price the Daes brothers and their nephews Carlos and Samir Amin had paid for the entire 76-hectare chicken farm eight years earlier, in 2012. [Deed Pg. 1] The plot sold off to the joint venture was a subdivided area, amounting to less than half the total area. [Deed Pg. 1] On a per hectare basis, the deal represented almost a 20X mark-up.
Tecnoglass has a lot of things that normally give investors comfort: (i) it’s listed on the Nasdaq, a major U.S. exchange (ii) it has a “big four” auditor (iii) it has reached a $1+ billion valuation (iv) it has ‘independent’ directors on its board and (v) has professional sell-side analysts covering it, issuing “buy” ratings.
Sometimes after we publish, investors reach out in surprise at how the checks and balances at any given company can fail all at once. We think Tecnoglass is yet another example of this type of failure.
The long, storied list of criminal allegations involving Jose Daes and Christian Daes – the two pillars of the enterprise – speaks for itself.
While the past is crucial for investors to have a comprehensive understanding of Tecnoglass as an investment, we believe an independent auditor should step in to provide the investing public much needed current clarity about Tecnoglass’ subsidiaries, customers, acquisitions, and capital expenditures.
To be clear, Tecnoglass has genuine production facilities and has at least a portion of genuine end-customers for its products. The key issue as we see it is that whatever legitimate business the company is partaking in is buried under a dogpile of opaque entities, related party transactions and questionable customer transactions.
Since the Daes family has a controlling stake in Tecnoglass with ~55% ownership, investors are subject to what we view as a toxic management team no matter what, barring a divestment from the family or ceding of control.
Following the collapse of the Cali Cartel in the 1990s, the Daes brothers steadily gained political and economic influence in Barranquilla. Their fortunes revolved not just around Tecnoglass and its subsidiaries but also since the late 1990s on their privately held construction companies which have consistently scored big public works contracts with backing from a string of allegedly corrupt mayors and local government officials.
A Colombian government portal shows one of the Daes; companies, A Construir SA, has been awarded at least $190 million in public works contracts since 2011, with others awarded to other Daes companies stretching back to at least the late 1990s.  Contracts have included roads, parks, bridges, police and fire stations, major drainage projects, sea ports, tourism regeneration projects and even the construction of a new City Hall in Barranquilla.
None of the specific contracts awarded to A Construir SA immediately appear to have been flagged for corruption but many of the mayors they have worked with have either been jailed or are under investigation for corruption during their time in office.
“As if they were King Midas, the mythological king who turned everything he touched into gold, everything around the Daes brothers is presented with a shiny halo by local and national journalists and (political) leaders, many of whom have experienced their generosity first-hand.”
One of Colombia´s leading financial newspapers called Christian Daes “the businessman who turned glass and aluminum into gold”. And following the theme, regional web portal Capital Caribe referred to Christian Daes as an “alchemist”, again extoling his ability to turn Tecnoglass to gold.
Leading national daily newspaper El Tiempo cited an earlier magazine article which had described José Manuel Daes as the “virtual mayor” during the second administration 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.
Hoyos was later jailed on charges of corruption, including signing illegal contracts during his time in office.
As mentioned earlier, in 2003, José Manuel Daes was shot in the head and neck during a botched assassination attempt stemming from a dispute over contract graft in Barranquilla. Daes was left paralyzed.
Despite the failed hit, the Daes brothers continued to maintain close political ties and win lucrative contracts with subsequent administrations.
Around $95 million dollars of contracts – about half those listed on the government portal were awarded between 2016-2019 during the second administration of Barranquilla mayor Alejandro Char, part of the most powerful political dynasty in that part of Colombia. Char has been repeatedly accused of corruption during his political career, as two-time mayor of Barranquilla and as governor of the Atlantico region, and currently remains under investigation.
In its investigation about public contracts handed out during Alejandro Char´s administration as mayor, La Silla Vacia alleges the Daes´ A Construir SA became the largest single contractor – and one of just four that won the majority of all contracts.
Confirming the Daes´ high-profile political connections, when Tecnoglass inaugurated a new $43 million plant in September 2015, Colombian President Juan Manuel Santos came to cut the ribbon.
And in March 2021, as part of the annual summit of the Interamerican Development Bank, current Colombian President Ivan Duque visited the Tecnoglass plant referring in his speech to Christian Daes only by his first name “Dear Christian” and praising him for “not producing glass but innovation”.
Land records show the plot was transferred for the same peso price of 2.3 billion COP (then worth about $1 million USD) to another Barranquilla-based entity Zofracosta SA in 2015.
That transaction was basically just a shift to another entity held by the same parties and controlling entities– 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 – the entity controlled by the Daes and Amin brothers – retain control of the remainder. According to documents published by Colombia´s Interior Minister – and following new planning zoning rules approved in 2019 – the remaining area is earmarked for an industrial and business park. [Pg. 7]
As a guide to property price trends in the region, the government´s National Statistics Department (DANE) shows that residential property prices, calculated in Colombian pesos, increased 45.77% in the eight years between 2012 and 2019. DANE does not publish figures for changes in commercial or agricultural property values for Barranquilla.
But any gain in peso terms would have been outstripped by the devaluation of the peso against the dollar in the same time period.
The Colombian peso slid from 1799 pesos to the dollar on Sept. 25, 2012 (the date of the land purchase by the Daes and Daes Amin brothers) to 3810 pesos to the dollar by Oct. 28, 2020 (the date of the land sale to Tecnoglass and the JV) – a 53% devaluation of the peso against the dollar.
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 In email responses from the criminal court that originally heard the case and the central archives in Barranquilla, staff said they had no record of Daes´ name nor could locate case files. But we found a 22-page document in the paper archives of Barranquilla´s Upper Tribunal (Tribunal Superior) which reviewed the case in 2001.
 At 1994 exchange rates.
 Miguel Mejía Munera initially took part in a government-led peace deal with right-wing paramilitary squads. He made the confession about his criminal associates and properties he owned as part of the so-called Peace and Justice Program.
 The investigation was ordered by the Industry and Commerce Superintendency (SIC) and was led by The Companies Superintendency, part of the Ministry of Industry and Commerce. The Financial Superintendency, part of the Finance Ministry, also collaborated.
 The Companies Superintendency, in what it described as a non-appealable final resolution, found that the Daes brothers has violated Article 30 of Law 222 of 1995.
 LexisNexis records show that Abuchaibe’s full name is Nicolas Abuchaibe Skafi. His father and mother are Nicolas Elias Abuchaibe Slebi and Jeanette Skafi, according to Colombian corporate records detailing family connections. Public obituaries establish that Elias Abuchaibe was brother to Evelyn Abuchaibe, mother to Jose and Cristian Daes and wife of Jose Manuel Daes Saieh. [1,2] Public social event documentation, along with other social media, corroborates that Elias Abuchaibe married Marina Slebi and had a son Nicolas Elias Abuchaibe Slebi, who is therefore cousin to the Tecnoglass Daes brothers. [1,2,3] His son is also called Nicolas Elias, taking his father´s surname Abuchaibe and his mother´s surname Skafi. [1,2]
 The Daes brothers´ sister Giselle married William Amin Escaf, who was an early Tecnoglass investor and shareholder. Their two sons are Samir and Carlos Amin Daes. William Amin Escaf is brother of influential regional politician Miguel Amin Escaf who has been a congressman and a senator and is seen as a close political ally of the powerful Char family.
 The import records list the recipient address (or “consignee address”) for the shipments is listed as being at 10695 Quaybridge, an address that does not seem to exist, according to a search of property records. The Florida entity records for Window Design & Installation LLC however clarify that the address is actually 10653 Quaybridge Ct.
 The GlassStudio website references an entity called Glass Studio Group LLC, which Florida records show was created in October 2017 at the same address under a different manager, Irene di Tongo (sic). That entity appears to have a close relationship to the GM&P leadership. The Glass Studio manager´s name appears to be a misspelling of Irene Di Tondo, listed elsewhere. She also seems to be the same person as Irene Monti, both of whom are listed as directors of another entity Angelo 1969 Inc. Monti is the surname of the GM&P manager Giovanni Monti. A property search shows the couple were husband and wife and had shared a Miami address. It is not clear from the Florida records who ultimately owns the entity.
 In Colombian corporate records, Tecnoglass uses the phrase “perfecting the subscription of shares in ES Metals”, suggesting the stake was acquired but indicates Tecnoglass only took control of that stake from January 2020 not early 2019 as stated in SEC filings, which may be attributable to a delay in the updating of the local records from the time of agreement. [Pgs. 5-6]
 Incorporation documents for one of the Daes brothers´ private companies Quattro, in 2001, list the names of Jose Manuel Daes, his wife Victoria Montoya Jaramillo and their four children David, Daniel, Nicolas and Melissa Daes Montoya.
 There appears to be little online trace of Christian Joaquin Daes Fernandez. The incorporation documents for ES Metals show his ID document and indicate he was born in Miami in January 1992. A media article from 2016 makes reference to Christian Daes touring the Tecnoglass factory with an unnamed 23 year-old son – which could correspond to the D.O.B on his ID. Daes has two other children, Sebastian and Isabella by a later marriage to Carla Garcia. There is a photo, simply titled “your son” on Daes Twitter feed.
 USD/COP exchange rate of 0.00033 x 53630000000 (Colombia pesos)
 (USD/COP) 0.00033 x 11864000000
 Luis Eduardo Barrios Lopez, one of the Daes brothers´ current partners in the business, took control of A Construir in 2006, according to filings at Barranquilla Chamber of Commerce. By 2010, 94% of the shareholding had been transferred to a Panamanian entity held by nominee directors and by April 2012 95.5% was in the name of José Manuel Daes. Corporate filings from Dec. 9, 2013 (11 days before the Tecnoglass SPAC merger) show that Tecnoglass subsidiary CI Energia Solar held a 5.7% stake in A Construir SA. It is not clear when CI Energia Solar took on that stake nor when it sold it. There appears to be no disclosure in SEC filings that Tecnoglass held a stake in A Construir.
 It is sometimes common for property vendors or buyers to understate the actual purchase price for property to avoid notarial fees and transfer taxes. However, the 2.3 billion peso price listed on official documents would appear to be accurate given that an earlier note in the minutes of a shareholding meeting of the vendor company PuroPolla SA stated they would be willing to receive a commercial sale price in excess of 2 billion pesos for the land.
Additionally, the notary public who handled the 2012 transaction for the land, listed as plot 040-99705, told us by phone that both parties were legally obliged to declare the full commercial sale price. Failure to do so he said would be a “falsehood”. Under Colombian law falsification of details on public documents, including property deeds, is considered a criminal offense and punishable by in excess of three years prison [Art. 288 Colombian penal code.]
 Hakkazam SA is owned 50-50 by two other entities, Kazam Ltda., jointly owned by Carlos Amin Daes and Samir Amin Daes and Invelco SA, ultimately controlled by the Daes family via a number of Panamanian-registered entities.
A Colombian securities superintendency investigation concluded in 2019 that although some of those Panamanian entities were registered in their parents’ names, ultimately Christian and José Manuel Daes had control because of the “advanced age, health conditions and personal circumstances” of their parents.
 It purchased the land with the help of a mortgage of unspecified value from Barranquilla-based finance company Serfinansa S.A. Mortgage company Serfinansa is owned by the Char family, the most politically powerful dynasty in that region of Colombia. Julio Torres Garcia, the co-CEO of Andina Acquisition Corp., the blank check company that brought Tecnoglass public, was also a director at Serfinansa when the mortgage was disbursed to the Daes and Amin Daes brothers.
 The father of Samir and Carlos Amin Daes is Willian Amin Escaf, who is married to José Manuel and Christian Daes´ sister Giselle. Willian Amin was an early shareholder and director in Tecnoglass and continues to have a stake in the company via Cayman Islands Energy Holding Corporation [Pg. 21 SIC investigation]. He is the brother of Miguel Amin Escaf, who has been in Colombia´s congress since 2006 first as a Representative and later a Senator. He is considered a close political ally of the Char dynasty.
 In December 2018, prior to the sale of the 34 hectare plot to the Saint Gobain Joint Venture, two other shareholders took a stake in then landowner Zofracosta – Silvana Cure Daes (almost 13%) and Tecnoglass Inc. subsidiary CI Energia Solar (4%).