Samsonite shares slide after short seller accuses it of massaging earnings
Shares in Hong Kong-listed Samsonite, the world’s largest luggage manufacturer, crashed today after a short seller alleged the business had “concealed slowing growth… massaged earnings and inflated margins”.
Hedge fund Blue Orca Capital, which described the suitcase maker as having a “history of mediocrity”, said that it should be trading at a discount to its peers due to “questionable accounting practices and poor corporate governance”.
The hedgie also called on Samsonite to appoint an independent audit firm to scrutinise all transactions involving its South Asian joint venture, the company’s treatment of inventory, its purchase price accounting and disclosed and undisclosed connections between Samsonite and its chief executive.
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“Samsonite should trade at a discount to its peers because of corporate governance concerns regarding its audit profile, dodgy related party transactions between the company and Indian entities controlled by the CEO and his family, and CEO Ramesh Tainwala’s resume fraud of claiming to be a doctor when he is not,” Blue Orca claimed.
Samsonite had not responded to City A.M.’s request for comment at the time of publication, but told the BBC that the allegations were “one-sided and misleading”.
The hedge fund, led by chief investment officer Soren Aandahl, accused Samsonite of playing “purchase price accounting games” through debt-fuelled acquisitions.
“Like an addict searching for its next fix, Samsonite has already announced its search for its next acquisition (in women’s handbags). The market should be sceptical,” the hedgie’s report stated.
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One such example was the company’s $1.8bn (£1.3bn) acquisition of US bag maker Tumi in 2016, Blue Orca said.
Samsonite’s shares took a dive in the Hong Kong trading session. They had plummeted almost 10 per cent by lunchtime to 30.70 Hong Kong dollars (£2.92) apiece, before Samsonite asked that trading be temporarily suspended.
Blue Orca alleged that Samsonite is in fact worth just 17.59 Hong Kong dollars per share – a further 43 per cent lower than its last traded price.
Samsonite was acquired by private equity firm CVC Capital Partners, which formerly owned Formula One, in 2007.
The following financial crisis hit the company hard, and Royal Bank of Scotland (RBS) ended up with a 30 per cent stake following a debt restructuring.
It eventually listed in 2011, raising $1.25bn.
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