Ex-Premiere heads on block

Jörn Krieger

The confession by German pay-TV operator Premiere that it published inflated subscription figures has resulted in further legal action. The German association for the protection of stock market investors, Schutzgemeinschaft der Kapitalanleger (SdK), has brought charges at Munich’s District Court against ex-CEOs Georg Kofler and Michael Börnicke, along with other leading former members of the management board.

SdK charges the managers with having provided incorrect information regarding classification, counting methods and the actual number of subscribers during both the 2005 stock market flotation and the 2007 capital increase, constituting capital investment fraud. “Contrary to the presentations in the prospectuses, subscribers who were either not at all relevant or from which no generation of revenues could be expected any more were counted in,” argues the SdK.

Furthermore, the association accuses Kofler and Börnicke of insider trading. According to SdK, Kofler earned more than €185 million on February 13 2007 alone by transactions with Premiere shares through Luxemburg-based Fernseh Holding S.à.r.l while Börnicke sold Premiere shares on February 14 2007 and on other dates for a total of more than €6 million. However, at this time it was not known to the public that the published subscription figures were inaccurate. It wasn’t until October 2 2008 that almost a million subscribers were removed from official figures to make 2.4 million, resulting in a drastic drop in the value of Premiere’s shares. SdK accuses Kofler and Börnicke of having therefore violated the regulations of the Securities Trading Act.

Kofler rejects the accusations as “absolutely groundless”. All financial and subscription figures were meticulously scrutinised by certified accountants before the flotation, he said in Munich. “There are no false figures, only two different marketing strategies.” He said that he was also interested in small-scale subscribers generating only €5 turnover and counted them into the figures.

According to Kofler, the new management appointed by main shareholder News Corp is not interested in low-price subscriptions and instead wants to generate a high average-revenue-per-customer. Kofler stressed that he always adhered to laws and regulations and he argues that the company was in no way disadvantaged through the different subscription classification. Kofler said that he is considering taking legal action against SdK for defamation. “I will vigorously defend myself in this debate.”

In April two shareholders already laid charges against Premiere at Frankfurt’s District Court. The investors accuse Premiere of having deceived them with false subscription figures. German stock exchange regulatory authority BaFin is currently examining the proceedings at Premiere, having launched an inquiry based on suspicions of insider trading and market manipulation.