WEATHER AUTHORITY : Flood Advisory View Alerts

Samsonite shares plunge after investment firm questions its business practices

Trading in Samsonite shares was suspended after the world's largest luggage maker was accused by an investment firm o...

Posted: May 25, 2018 10:42 AM
Updated: May 25, 2018 10:42 AM

Trading in Samsonite shares was suspended after the world's largest luggage maker was accused by an investment firm of questionable business practices.

The stock plunged by 10% in Hong Kong before trading was halted after it came under attack by short sellers -- investors who profit by driving down the value of a company's shares.

Blue Orca Capital, a new firm led by renowned short seller Soren Aandah, claimed in a report published on its website Thursday that Samsonite has masked slowing growth by borrowing heavily to make 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 skeptical," reads the report.

Blue Orca also accused the company of using questionable accounting techniques to massage earnings and inflate its profit margins.

"Samsonite is a mid-level brand masquerading as a premium luxury player," according to the investment firm.

Related: Jim Chanos: Tesla investors are 'paying money to lose money'

Samsonite shares were halted in Hong Kong late Thursday morning at the request of the company while it prepared its response to the report.

Samsonite said in a statement Thursday night that the Blue Orca allegations were "one-sided and misleading, and accordingly, the conclusions drawn in the report are incorrect."

The company added that it would issue a more detailed response to the report "in due course." It warned shareholders to treat the report with caution and said it reserved the right to take legal action against Blue Orca.

Samsonite said its shares will resume trading in Hong Kong on Friday.

Much of the report's criticisms focus on Samsonite's acquisition strategy, which included the $1.8 billion buyout of upscale American rival Tumi two years ago. It alleges Samsonite used certain accounting techniques to artificially boost its profit margins following the deal, and believes the company's shares are overvalued by 44%.

Most mainstream analysts have a different view on Samsonite. Nine of 15 brokers who cover the stock rate Samsonite a buy, according to data provider Factset. Analysts expect Samsonite's operating profit to increase more than 20% in the current financial year.

"We believe the short seller's significantly lower target price for Samsonite does not factor in the company's ability to generate sustained positive free cash flow," said Morningstar analyst Lorraine Tan in a note on Thursday.

Blue Orca also flagged what it described as "dodgy" transactions between Samsonite CEO Ramesh Tainwala and Indian entities it said were controlled by him and his family. It even accused Tainwala of lying about having a doctorate in business administration.

"Ultimately, we believe that Samsonite is simply carrying too much baggage to trade at such a high premium," the report said.

Related: Bill Ackman's Herbalife disaster is finally over

Aandahl, who established Blue Orca earlier this month, has a track record for uncovering accounting shenanigans.

The Harvard-educated former attorney cut his investment teeth short-selling Chinese companies listed in the United States. In 2016, he was named "Short Seller of the Year" by investment publication Activist Insight.

Like many short sellers, Blue Orca doesn't disclose who its investors are or how much money it manages. The company makes money for its clients by taking a "short" position in a stock and then trying to drive down its price by circulating negative reports.

Last year, Aandahl targeted Australian sandalwood grower Quintis, which he described as having a "ponzi-like structure." The stock plunged almost 80% and the company is now in administration.

His forecasts haven't always been on the money. In 2016, he advised investors to sell shares in Japanese trading house Itochu, but the stock has almost doubled in value since.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 295295

Reported Deaths: 6724
CountyCasesDeaths
DeSoto19672230
Hinds18799386
Harrison16710278
Rankin12685264
Jackson12592226
Lee9687160
Madison9457199
Jones7962146
Forrest7208136
Lauderdale6833226
Lowndes6022137
Lamar588080
Lafayette5733113
Washington5218130
Bolivar4609123
Oktibbeha441393
Panola430394
Pearl River4167130
Warren4129114
Pontotoc408869
Marshall403192
Monroe3989126
Union395374
Neshoba3807168
Lincoln3541102
Hancock347374
Leflore3375118
Sunflower318386
Tate302474
Pike300195
Scott293870
Alcorn291861
Itawamba289975
Yazoo289262
Tippah278765
Copiah277857
Coahoma277568
Simpson274878
Prentiss269758
Wayne253841
Marion252678
Leake252471
Covington248879
Grenada247377
Adams234377
George231745
Newton229652
Winston221675
Jasper213445
Tishomingo212365
Attala206569
Chickasaw201151
Holmes182270
Clay179150
Stone172429
Tallahatchie170539
Clarke169371
Calhoun157828
Smith152731
Yalobusha144836
Greene127633
Walthall124140
Noxubee122829
Montgomery122438
Perry121634
Lawrence120321
Carroll118225
Amite111533
Webster110630
Jefferson Davis101731
Tunica99023
Claiborne98429
Benton93324
Humphreys92827
Kemper90223
Quitman77114
Franklin76119
Choctaw69516
Jefferson62527
Wilkinson62426
Sharkey48817
Issaquena1676
Unassigned00

Alabama Coronavirus Cases

Cases: 493769

Reported Deaths: 9931
CountyCasesDeaths
Jefferson710731374
Mobile36139727
Madison32425455
Tuscaloosa24184410
Montgomery22586500
Shelby21968215
Baldwin19758283
Lee14967153
Morgan13667251
Calhoun13300286
Etowah13184319
Marshall11262209
Houston10104261
Elmore9385185
Limestone9363134
Cullman8897181
St. Clair8827223
Lauderdale8607211
DeKalb8459175
Talladega7523163
Walker6524255
Jackson6495102
Autauga627091
Blount6102127
Colbert6004118
Coffee5249102
Dale4642107
Russell404930
Franklin399177
Covington3960106
Chilton3876100
Escambia377672
Tallapoosa3588142
Clarke343650
Chambers3413110
Dallas3403141
Pike293472
Lawrence283484
Marion281995
Winston246867
Bibb245060
Geneva239970
Marengo236455
Pickens224654
Barbour211651
Hale210568
Fayette200756
Butler196866
Henry182441
Cherokee177038
Monroe166139
Randolph163740
Washington156535
Crenshaw144854
Clay144454
Macon142043
Cleburne137839
Lamar132833
Lowndes131151
Wilcox121825
Bullock116936
Conecuh106724
Perry105627
Sumter98531
Coosa88923
Greene88232
Choctaw55123
Out of AL00
Unassigned00
Tupelo
Cloudy
44° wxIcon
Hi: 50° Lo: 41°
Feels Like: 44°
Columbus
Cloudy
41° wxIcon
Hi: 50° Lo: 41°
Feels Like: 36°
Oxford
Cloudy
39° wxIcon
Hi: 48° Lo: 39°
Feels Like: 34°
Starkville
Cloudy
37° wxIcon
Hi: 47° Lo: 39°
Feels Like: 37°
WTVA Radar
WTVA Temperatures
WTVA Severe Weather