Shares of Chemours (CC) crashed approximately 35% at the market open on Thursday after the company announced it is putting its top executives on administrative leave amidst an internal review concerning its accounting practices.
The review, led by the board's audit committee with help from external counsel, is examining the ethics hotline reporting procedures, working capital management practices, and certain non-GAAP metrics' accuracy.
President and CEO Mark Newman, CFO Jonathan Lock, and Principal Accounting Officer Camela Wisel are the executives affected.
The probe will focus on “the processes for reviewing reports made to the Chemours Ethics Hotline, the Company’s practices for managing working capital, including the related impact on metrics within the Company’s incentive plans, certain non-GAAP metrics included in filings made with the Securities and Exchange Commission or otherwise publicly released, and related disclosures,” Chemours said in the announcement.
As a result, the chemical company had to postpone the release of its Q4 earnings report, initially scheduled for Wednesday.
Still, Chemours reported unaudited 2023 operating results with $6bn in sales, aligning closely with expectations.
Despite a net loss of $225-235 million, including significant litigation settlements and restructuring charges, the adjusted net income is estimated between $449-469 million the company said.
This surpasses both the forecasted $440 million and the consensus expectations of $437 million, suggesting a stronger Q4 than anticipated, however, CC noted it is “unsure” of its conclusions without audited formal filings.
In response to these developments, BMO Capital Markets analysts downgraded the stock to Underperform and cut the price target to $19.
“We continue to believe many of CC's core businesses should see a recovery in 2024," analysts said.
“However, with risk to the numbers and the heightened risk tied to the abrupt management changes, we expect CC to underperform the broader Chemical sector and pull our TP to $19,” they added.