Investors sold Tyco International shares amid reports that the company failed to disclose details on billions of dollars it spent on recent acquisitions.
Tyco has faced questions since announcing earlier this month plans to break itself up into four independent companies, in a bid to create more value for its shareholders.
On Monday, the company criticized a report in The Wall Street Journal that said the company made more than US$8 billion in acquisitions in the past three years, but failed to disclose them.
The Journal article concerned an e-mail the company sent to analysts last Thursday in which Tyco said more than a third of the US$11.3 billion it spent on acquisitions last year was spent on unannounced deals. The Journal, which said it was provided with fresh information about the deals after questioning Tyco, said the company paid US$4.19 billion in cash for unannounced deals last year.
That report contributed to the Bermuda-based holding company's shares falling US$6.96, or nearly 19 percent, to US$29.90 after ratings agencies Standard & Poor's and Fitch downgraded the debt of Tyco International and its wholly-owned financial subsidiary, Tyco Capital.
The company's shares have fallen by nearly half since December. In extended trading Monday, shares were down another US$0.45.
Spokeswoman Maryanne Kane said the numbers were correct, but that the company objected to any suggestions that they amounted to any kind of failure to disclose. She said Tyco followed proper accounting procedures, and that it would not make sense for a company with US$36 billion in revenue to issue press releases on tiny acquisitions. All of the numbers, she said, showed up in the bottom line of Securities and Exchange Commission filings.
Also on Monday, Tyco International announced plans repurchase US$4.5 billion of its commercial debts and improve liquidity, or its ability to meet its financial obligations.
On a conference call with investors, Tyco Capital officials acknowledged they have been shut out of the corporate bond market in recent days on accounting worries.
"It was extremely tight today, and I think with the ratings actions taken place, we have to go on the assumption that the market is not there for us," president and chief executive Albert Gamper Jr. said.
Commerzbank fixed-income analyst Steve Altman said Tyco Capital's credit remains stronger than that of the parent company, which is to blame for the downgrades, but like any finance company it faces problems if it's permanently kept of the commercial paper markets.
"I think they did their best to try to quell the concerns," Altman said. "I think as long as there's this period in between now and the divestiture the market is just going to trade very skittishly."
Tyco officials released copies of a letter demanding that TheStreet.com retract an article posted to its site Friday accusing Tyco of violating disclosure regulations and also overstating its cash flow.
"All of your assertions are factually incorrect and refuted by Tyco's public filings with the SEC," the letter from Tyco executive vice president and chief corporate counsel Mark Belnick said.
Babson College accounting professor Robert Halsey said the company did not appear to have violated any accounting guidelines, but said there are reasonable doubts that whether the acquisitions, when taken as a whole, are immaterial, as the company claims.
Al Hartgraves, an accounting professor at Emory University in Atlanta, said rules like this one are likely to be revisited due to increased scrutiny of accounting guidelines.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS