Fast forward to today, and the story has taken a dramatic turn for the worse. On November 1, the company announced that the acquisition would be delayed due to an investigation into potential concerns regarding accounting of crop payments to walnut growers; at that point, the stock fell from $64 to $52, a collapse of nearly 20%.
Today, the results became apparent: The company had wrongly accounted for the payments to walnut growers, and will need to restate their financial statements for the past two fiscal years. In addition, Michael J. Mendes, chairman, president and CEO, and Steven M. Neil, CFO, were both put on administrative leave; negotiations about their severance and board seats are ongoing (clearly they should be dismissed without a penny in severance).
According to the Wall Street Journal article (which notes the opinion of someone familiar with the matters), Procter & Gamble is “highly unlikely” to complete the sale as a result of these new revelations, and will likely search for a new buyer.
As a result of this news, shares plunged even further; at the time of writing, the stock was trading in the after-hours market around $20.75 per share, a drop of more than 40% from Thursday’s close. Since peaking around $90 per share in September, shares have fallen more than 75%.
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About the author:I'm a value investor, with a focus on patience; I look to buy great companies that are suffering from short term issues, and hope to load up when these opportunities present themselves. As this would suggest, I run a fairly concentrated portfolio by most standards, usually with 8-10 names; from the perspective of a businessman rather than a market participant / stock trader, I believe this is more than sufficient diversification.
I hope to own a collection of great businesses; to ever sell one, I would demand a substantial premium to the average market valuation due to what I believe are the understated benefits to the long term investor of superior fundamentals and time on intrinsic value. I don't have a target when I purchase a stock; my goal is to replicate the underlying returns of the business in question - which if I've done my job properly, should be very attractive over a period of many years.