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THE HEADLINES
GENRON
GE shares fell 11.3% yesterday following a scathing report penned by an early whistleblower of the Bernie Madoff Ponzi scheme which raised several concerns about the company’s accounting practices. Accounting practices which are already being investigated by the SEC.
Umm, who?
Harry Markopolos is an accounting expert from Boston. Years before Madoff’s conviction in 2008 by the FBI, Markopolos raised concerns to the SEC about the “investment strategy” and the impossible returns that were being generated.
More recently, he pointed out a foreign currency trading scandal involving State Street and Bank of New York Mellon in 2016, which earned him a nice little cut of the $100M award.
And now he’s back for more
Markopolos alleges that General Electric “has been running decades-long accounting fraud by only providing top line revenue and bottom line profits for its profits, leaving out cost of goods sold, SG&A, R&D, and corporate overhead allocations.” These practices are allegedly very similar to the ones used in the Enron scandal.
He notes that this case could be bigger than Enron and WorldCom combined, as GE’s $38B in accounting fraud amounts to over 40% of its market cap.
GE has, unsurprisingly, denied all claims, and accused Harry of attempted market manipulation, pointing out that the report was commissioned by an unnamed hedge fund that took a short position in the house that Tommy Edison built.
MOVIN’ ON UP
Walmart reported earnings yesterday … and Lauren Sanchez might be setting her sights on a Walton soon. Q2 sales rose 2.8% due largely to higher grocery sales and online traffic. Stateside e-commerce revs rose 37% which helped contribute to the company’s growing market share. Walmart’s stock increased 6% during trading.
Doubling down on the strong quarter, the go-to discount retailer of camo wearers in middle America increased its profit target and earnings expectations for the year, swinging its big d*ck in the face competitors JCPenney and Macy’s which have both dropped outlooks for the remainder of 2019.
Meanwhile, in China
Across the pond, Jack Ma’s Alibaba reported a nice little jump in sales … 42% to be exact. The quarterly report also showed that the firm more than doubled its profits to $14.5B. Both numbers are pretty good signs that the company hasn’t yet felt the effects of the trade war between the US and China.
Ma, who is stepping down from the firm next month, offered a nugget of advice (read: order) to his successor, Daniel Zhang: continue to focus the company’s efforts on making inroads with the country’s rural areas. Kind of like Walmart, but with fewer jorts. Alibaba shares rose 3% on the news.
IN OTHER NEWS
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- The European Central Bank shut down its Integrated Reporting Dictionary site Thursday after it was hacked and infected with malware. The ECB notes that subscribers’ email addresses, names, and titles may have been stolen, and confirmed that the attack occurred as early as December 2018 but went undetected for months.
- #DBnotaBB. After bouncing back on the optimism of CEO Christian Sewing’s turnaround strategy, Deutsche Bank hit an all-time low in Frankfurt trading yesterday. Down 94% from its 2007 all-time high, the firm is just one of Europe’s major financial institutions that have had a failure to re-launch following the financial crisis of 2008. Spain’s Bankia and Banco de Sabadell, Italy’s UniCredit, and German compatriot Commerzbank are all trading at or near historic lows.
- Spotify is kicking the tires on a premium membership and is testing the new price point in Scandinavia. It will raise the price of its family plan subscription by about 13% from its current $15 per month. The move comes as music companies raise concerns about falling revenues per user and question why Spotify hasn’t used its market-leading position to raise rates.
- UPS has grabbed a minority stake in TuSimple, a self-driving truck startup. The two firms already had a partnership to carry goods from Tucson to Phoenix, and that partnership will expand with UPS’s new investment, adding more routes to run self-driving tests in the Western US.
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