Anta outruns short-sellers at surprising pace 9 Jul 2019 The $18 bln Chinese athletic-gear maker is under attack again, this time from Muddy Waters, which accuses it of fraudulently inflating profit margins. Despite an abundance of doubters, the stock is up a third this year. Resisting scepticism may be a less challenging sport.
India hurts itself with clumsy Big Four blitz 11 Jun 2019 After punishing PwC and EY, New Delhi wants a five-year audit ban on Deloitte and KPMG’s affiliate for alleged failings at shadow bank IL&FS. The process hardly reflects the good governance India is pushing. And it’s unclear local firms can handle all the international business.
Metro Bank capital hike depends on luring new fans 13 May 2019 The troubled UK upstart is finalising a 350 mln pound equity issue. The prospect of buying in at 50% of book value should entice some investors. But to earn a decent return, Metro will have to persuade regulators it can safely boost lending while reassuring jittery depositors.
Holding: Investors ignore law of “stuff happens” 11 Apr 2019 Using fiascos like oil-well blowouts and tainted burritos to claim stock fraud is increasingly common in the United States, but misguided. Companies have a duty to disclose significant risks, not warn of unlikely mishaps. Arguing otherwise enriches lawyers at investors’ expense.
Lyft makes flattering “contribution” to accounting 14 Mar 2019 The term commonly means revenue less variable costs. The ride-hailing firm’s take on it excludes even some of those outlays and suggests healthy profit in the future. Like WeWork’s “community-adjusted EBITDA” prospective IPO investors should probably ignore the metric altogether.
UK audit cop upgrades to paper tiger 13 Mar 2019 The government has proposed a new regulator with powers to publish third-party reports into accounting disputes. Embarrassment risk should give auditors more cover to stand up to management. But a lack of sanctions means the body still lacks teeth to prevent corporate failures.
Metro Bank shoots itself in the other foot 31 Jan 2019 The UK challenger lender has admitted that regulators, not the group itself, found recently revealed accounting fudges. What was dubbed as an oversight now looks even worse. That’s a lamentable look for a bank that may well need to raise capital later this year.
Patisserie Valerie has a way out of collapse 23 Jan 2019 The cake chain called in administrators KPMG, but buyers have expressed interest. To make the numbers stack up, the acquirer would likely wipe out most of the unsecured creditors, including chairman Luke Johnson. If this happens, the battered baker could yet have a future.
UK audit reform leaves unfinished business 18 Dec 2018 Britain wants companies to use two auditors and stricter Chinese walls between consulting and book-keeping. The moves should help competition, but they won’t be as effective as radical options like breaking up groups and market-share caps, nor prevent failures like Carillion.
Fraud case reminds that bad M&A is a team effort 30 Nov 2018 U.S. prosecutors are trying to prove Autonomy CEO Mike Lynch deceived buyer HP in an $11 bln deal gone wrong. Such things tend to be a team effort. While fuzzy accounting rules that fostered this dispute are less of an issue now, the forces behind disastrous deals are evergreen.
Living wills put fresh nail in outsourcer coffin 6 Dec 2018 The UK wants the likes of Serco and Capita to show that contracts can be transferred to peers if they fail. It’s a prudent move after Carillion’s collapse, but could push up costs and make companies less aggressive when bidding for business. The state may keep more work in-house.
Guest view: Governments need more accountants 18 Oct 2018 Many states waste their resources and hide their obligations, write Ian Ball and Dag Detter. Poor accounting is partly to blame. Measuring public assets and liabilities is a first step to better financial management. That requires more accountants - and fewer economists.
UK auditor competition drive comes at a price 9 Oct 2018 The UK Competition and Markets Authority wants to break the grip of the Big Four accountants. It may duck radical measures, like forcing them to separate bookkeeping and consulting. Even simple ones, like market share caps and joint audits, will mean higher costs for companies.
Skilling could have earned stripes more usefully 31 Aug 2018 The former Enron CEO was released from prison into a halfway house. During his time behind bars, corporate malfeasance flourished but prosecutions dropped. Using high-profile arrests as a deterrent doesn’t work if prosecutors don’t catch criminals. Felons could help.
1MDB trial is just start of Malaysian war on graft 4 Jul 2018 Former Premier Najib Razak has been charged in connection with the $6 bln scandal. The swift action is commendable. Deeper change is needed to reassure investors, though. That means measures like forcing politicians to declare assets, and regulating party funding.
KPMG wrist-slap shows auditors are too few to fail 19 Jun 2018 Half the accounting firm’s audits for large companies last year were flawed, the UK watchdog found. Bigger fines and closer scrutiny are reasons to improve. But as long as competition is limited to the “Big Four” it’s hard for clients to switch – or for regulators to get tougher.
Chinese tutor’s short answer will be instructive 15 Jun 2018 Muddy Waters invoked Enron in its fraud accusations against $24 bln Tal Education. Complicated attacks can be hard for outsiders to parse, but corporate responses to bearish investors are often telling. China Internet Financial Services and AMD provide useful case studies.
Samsonite short case piles up Hong Kong’s baggage 24 May 2018 An experienced stock sceptic has laid into the $6 bln luggage-maker’s governance and accounting. It’s a bigger and better-known company than the Chinese minnows typically targeted. For a market relaxing standards to broaden its appeal, Samsonite gives investors more to unpack.
Hadas: WeWork blather is call to rework accounting 16 May 2018 The office-rental outfit’s “community-adjusted EBITDA” is ridiculous, but it gets at a real problem: valuing fast-growing firms. Standard measures would benefit investors more than company-defined ones. Accountants can help – once they learn to deal with the post-factory economy.
Caps not breakups are best cure for Big Four woes 16 May 2018 UK lawmakers suggested forcing auditors to hive off their consulting units. That might prevent conflicts but could make the companies less profitable and competitive. Imposing limits on auditors’ market share is a better way to make the sector more efficient and avoid blowups.