Few quick updates on the Olympus fraud accusations by their former CEO Michael Woodford:
- "Ousted Olympus Corp chief executive Michael Woodford is consulting police over whether he needs protection after passing "new information" to British fraud investigators about the Japanese company's irregular payments to advisory firms" (Reuters)
- "The veteran banker, Hajime 'Jim' Sagawa, owned an obscure U.S. financial firm which was hired by the endoscope-maker five years ago to provide what later turned out to be stunningly expensive advice, a fee of $687 million (435 million pounds), the documents show" (Reuters)
- "The $687 million fee Japan's Olympus Corp paid its financial advisers for the $2.2 billion purchase of a British medical equipment maker is one for the record books, literally" (Reuters)
- "Japan's Olympus Corp said on Friday it would set up an independent panel to examine its past M&A deals after shareholders demanded an explanation for massive fees paid to advisers in a 2008 acquisition" (Reuters)
- "Shares of Olympus Corp (7733.T) briefly fell below 1,241 yen on Friday, a point at which they were worth half of their value before the company's ongoing management scandal erupted. Olympus was down 5.2 percent at 1,251 after earlier falling as low as 1,236 yen" (Reuters)
- "The Serious Fraud Office (SFO) tonight confirmed that it yesterday received a second visit from the ousted Olympus CEO Michael Woodford" (AP)
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16 Comments
It sounds less scandalous now, and just more plain stupid.
Stupid in two ways:
1) the original deal (giving warrants(! — not options, but warrants!) instead of cash)
2) if there was no scandal, and just a dumb move, then Woodford is a complete idiot. If it turns out it’s just bad management, he is going to look very reactionary, and no one will trust him to run their company anywhere else.
http://uk.reuters.com/article/2011/10/21/olympus-fee-idUKL3E7LL0BU20111021
If there were strong evidence of fraud then Mr Woodford had no choice. To save his neck both literally and figuratively he had to report the wrong doing to the relevant authorities.
A 50% drop in share price over the past few days is not panic selling. Investors have had sufficient time to assess Mr Woodford accusations and the effect on Olympus fair value.
It’s not panic selling? Because the market always works rationally? The data is still being uncovered. The story is not yet clear. The market may still move the stock up or down, based on further revelations.
The stock market is dynamic … a company’s share price is based on available information and expectation of future earnings. Of course, due to future revelations the share price will be affected.
> If it turns out it’s just bad management [...]
I wish somebody would allow to piss away few millions $$$. I can even guarantee to never come to the office sober! Or ever come to the office!! Bad management guaranteed!!!
[/pathos]
“Bad management” is inexcusable pretext for professional businessmen running multi-billion dollar public company. Private companies – yes. But not public companies.
the noose is getting tighter!
$687 million (435 million pounds)…What F#cking medical device going to cost $687 million (435 million pounds)? Does it exist? Do Shareholders know about it….obviously not. These is the left overs from the financial crisis of 2008. Bang!
Actually, the medical device company that was bought cost Olympus US$1.9 Billion dollars. The US$697 Million was just for advice on purchasing the company. Advice that has not been revealed, and is, oh, US$680 million more than advice usually costs.
hmm.. actually why should anybody care what olympus pays to whomever??
it is not like we the customers are have any disadvantages of that..
it is just bad management and wasting money that could have been invested in new technologies.. so olympus is just hurting themself..
so what the big deal? i mean why does there need to be police investigations..
the shareholders!
well.. now they know they can´t trust everybody.. not even the biggest companies.
is that not a good thing?
The issue is whether the “unknown” investment advisers have any ties to the board. If the board pays the advisers, who then either buy stuff from another business the board owns, or just plain kicks-back some money, then it’s fraud and embezzlement. Red flags jump up when the advisers are in an off-shore situation, especially in a place that is prone to protect corporate secrecy either through law, lax oversight, or poor record keeping. Caymans are a pretty well known harbor for questionable businesses. The question on the table is — was the Oly management/board inept, or did they use a Cayman Island vehicle to embezzle money from a public company.
Should we care? Yes. A mismanaged company is at best inefficient at producing products that customers want. In the worst case, the company goes away leaving customers unsupported.
Sure, we have other choices in companies providing similar products, but a system camera like the Pen means we invest in multiple parts of a system, and we don’t like seeing that the system could be in jeopardy.
What else to expect from a company that lies to their own customers about equivalence and still overcharge them?
Well some fraud was committed since this was a material agreement yet was not provided in investment documentation (not sure of Japan equiv of SEC filings. I believe there was already a comment to this effect by the PW auditors.
Beyond that it is hard to tell if it was just plain stupidity or fraud. It sounds like the board members who authorized the transaction were ‘friends’ with the third party and that in itself suggest conflict of interest.
Anyways Olympus, while market somewhat niche, has made very fine (and unique design) products over the years so it is somewhat sad that a few ‘rotten’ eggs at the top of the pyramid has done this sort of harm (whether it be stupidity or fraud). But on the flip side it has always amazed me just how much money folks at the top will spend ad-hoc (whether it be M&A or new offices) while at the same time cut salary or lay off the common worker.
That’s it, I am switching to Nikon… wait, I have a Nikon already!!!
Seriously I have always liked Olympus products. But the company is now sailing in shallow waters and I really wish they will make it back to business with fresh and talented management. There seems to be some very skilled people working in Olympus (apart from the management) and it would be a real loss for everybody to see the company go from bad to worse.