With thousands of companies holding AGMs during proxy season, it’s hard to know where to start. Glass Lewis’ Controversy Alert service can help, identifying the most crucial meetings globally and allowing investors to make better informed voting decisions with the latest information in hand.
In this post, we provide a roundup of the AGMs taking place this week that were previously highlighted by Controversy Alerts, and dive deep into the situation at Techtronic Industries. To get alerted ahead of time, get in touch and sign up for Glass Lewis’ Controversy Alert service.
Controversy Alerts May 8 — May 12, 2023
5/8 Dufry AG; Controversy Alert issued 4/19
5/8 Leonardo; issued 4/25
5/9 Koninklijke Philips NV; issued 4/21
5/9 Pitney Bowes Inc.; issued 5/2
5/10 Spirit Airlines Inc; issued 4/24
5/10 BPost NV; issued 4/21
5/10 TravelCenters of America Inc.; issued 4/28
5/10 Enel SpA; issued 4/28
5/11 OSB Group plc; issued 4/19
5/11 Norfolk Southern; issued 4/24
5/11 PT Adaro Energy Tbk; issued 5/1
5/11 Adidas AG; issued 4/24
5/11 Universal Music Group NV; issued 4/26
5/12 Techtronic Industries Co Ltd; issued 4/26
Deep Dive: Techtronic Industries Co. Ltd.
Last week Wall Street was rocked by allegations that activist investor icon Carl Icahn has effectively been running a Ponzi scheme. Shares of Icahn Enterprises fell roughly 40% before partly recovering, with the panic stoked in part by the reputation of the short seller, Nathan Anderson’s Hindenburg Group, which had previously targeted Nikola founder Trevor Milton, amongst others.
However, one doesn’t necessarily need a strong reputation, a Wikipedia page, or (as of publication of this post) even a working website to take billions off a public company’s valuation. Just ask Hong Kong-listed Techtronic Industries, whose upcoming AGM is being held just months after the company was hit nearly as hard as Icahn Enterprises, by a far less established short seller. The tool manufacturer saw its shares lose as much as 19% of their value in February after “Jehoshaphat Research” (good luck finding a working link) claimed it had inflated profits for more than a decade.
The report alleges that Techntronic has engaged in manipulative accounting, leading to an exaggerated profit margin, using the accounting technique of “snowballing” by consistently transferring billions of dollars in regular expenditures to various asset accounts. Additionally, the report claims that Techtronic frequently discards significant amounts of tangible assets at near-total losses, indicating that routine business expenses have been capitalized. Jehoshaphat also accused Techtronic of ignoring its own accounting policy on bad debt provisions to delay recognizing expenses.
The next day, Techtronic released an announcement vehemently rejecting the allegations, noting that “Jehoshaphat aims to undermine shareholders’ confidence in the Company and its management because it benefits from a fall in the Company’s share price.” Techtronic claimed that the report contained “multiple defamatory, biased, selective, inaccurate and incomplete statements.” To add, the company warned shareholders that “the [r]eport contained misleading statements and unfounded allegations which may lead to unusual price movement.”
In an interview with CNBC, CEO Joseph Galli Jr called the report’s claims “baseless” and said that the company was “fully compliant with all accounting principles”, he went on to note that independent auditors had signed off on the annual results this year as they had in previous years.
Nonetheless, trading in the company’s shares was briefly halted after a market value wipeout of about US$4 billion, and two U.S. securities-centric law firms have subsequently announced investigations of Techtronic with an eye towards investor suits.
Techtronic’s shares have trundled along since the initial drop when allegations were leveled, and concerned investors have had plenty of time to sell. Yet the board could still face questions on the topic, with the audit committee’s financial expert, Robert Getz, standing for reelection. Shareholders may also ask about the chair of the audit committee, Peter Sullivan, who is still considered independent by the company despite serving since 2008.
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