Most business travelers would know Samsonite’s brand and products, being the world’s largest luggage makers. Finance professionals now know of it in another sense: as the latest company accused by a short seller of questionable accounting practices and sub-par governance.
Listed in Hong Kong in 2011, the American firm halted trading in its shares on May 28 “pending the release of a further announcement in relation to certain allegations contained in report regarding the Company, which may constitute inside information of the Company.”
Samsonite’s stock price lost 20% of its market value over two days after Blue Orca Capital questioned its accounting practices on May 24. “We suspect that Samsonite has concealed slowing growth through debt fueled acquisitions and that it has massaged earnings and inflated margins through highly questionable purchase price accounting,” the short-seller asserted in a 48-page report.
Samsonite has branded Blue Orca’s claims as “misleading” and “one sided.” The company is expected to rebut the allegations in detail in the “further announcement” it promised when halting trading in its shares.
If past short-seller attacks are any indication, Samsonite faces an uphill struggle to regain investor confidence. Singapore-listed commodities trader Noble Group was targeted in 2015 and is now being restructured. Another Singapore-listed firm, China Minzhong Food, was attacked in 2013 and is now delisted.
Global agribusiness concern Olam International, targeted in 2012, did manage to survive and thrive, thanks to support from Singapore government investment arm Temasek and Japan’s Mitsubishi.
Samsonite has a hard road ahead to come out of the other side like Olam – not like Noble Group or China Minzhong.