The stock price of Aussie-bound CHS Electronics took a dive last week under the shadow of a class action lawsuit which claims the global distribution giant presented deceptive financial statements and earnings, thus deceiving investors.
Steven Cauley, an attorney in the US, filed the complaint with a US District Court on behalf of all purchasers of CHS Electronics common stock (traded on the NYSE under the symbol HS) during the period from February 27, 1997 through to March 10, 1999.
According to a stock market report, "the complaint charges that CHS Electronics and some of its officers and directors violated federal securities laws by submitting false financial statements and false earnings".
Consequently, a planned visit to Australia this week by Antonio Boccalandro, CHS' mergers and acquisitions manager, to consummate recent consolidation in Australia's channel, has been cancelled.
Local distributor CHA announced it was hosting a press conference last Thursday to announce it had been acquired by CHS, a story which ARN broke last month. Subsequently, Roger Bushell, managing director of CHA, advised that the press conference would not go ahead and that he was not sure what to think of the US lawsuit.
"Antonio apologised for not being able to make it and said these sorts of lawsuits are common in the US," Bushell said. "It's a bit like the ambulance-chasing lawyers that are all over the place over there."
One commentator in the US referred to the action as being in response to "what appears to be a minor accounting error", however, it is obviously serious enough to warrant the full attention of all senior executives.
Last week, CHS announced fourth-quarter results well below Wall Street expectations and there has been some volatile trading of the stock in recent weeks. CHS' share price was around $US15 at the beginning of the year but is now about half that price while the 52-week range is from $4.50 to $24.50.
"We checked out the company very thoroughly before the acquisition and there is no history of this sort of thing," Bushell said. "It is a bit embarrassing to actually have to cancel the press conference.
"We tried to get someone down from the Asia-Pacific office in Singapore, but that fell through as well. This doesn't change anything in relation to the acquisition of CHA. Our deal isn't affected," he said.