Shares in Hong Kong-listed luggage maker Samsonite International plummeted by more than 11 per cent in early trading in Hong Kong today, leading to a suspension of shares. The firm is accused of ‘questionable accounting practises and ‘poor corporate governance.’
In a report by newly formed activist short-seller Blue Orca Capital, it is claimed suspicion that Samsonite concealed slowing growth through debt-fuelled acquisitions, massaged earnings and inflated margins through highly questionable purchase price accounting. The report added: ‘Samsonite should trade at a discount to its peers because of corporate governance concerns regarding its audit profile.' Transactions between the company and Indian entities controlled by its CEO Ramesh Tainwala and his family have also come under fire. The report has called for an independent audit firm to scrutinise all transactions involving its South Asian joint venture, the company’s treatment of inventory, its purchase price accounting and disclosed and undisclosed connections between Samsonite and its CEO.
Asia at ‘epicentre’ of global innovation
Samsonite, headquartered in Luxembourg, is ‘simply carrying too much baggage to trade at such a high premium, according to the Texas-based Blue Orca. The report stated the luggage-maker should trade 48 per cent below its last traded price, HK$30.7 (US$3.91). Soren Aandahl, formerly the director of research and chief investment officer at international short-seller Glaucus Research, launched Blue Orca on May 17, and Samsonite is the first high-profile target the company chosen for scrutiny. Mr. Aandahl said when launching the company that Asia and China in particular, are at the epicentre of global innovation and that he ‘will not hold back from exposing dishonest or complacent companies.’ Short-selling in the Hong Kong market has recently become fashionable raising concerns in the Asian market, including companies with high valuations, poor cash flow, concentrated ownership and frequent connected transactions.