Chemours Co., a specialty materials and chemicals company, has experienced a significant decline in its stock value following escalating accounting concerns. Investors were taken by surprise when they learned that the accounting issues were much worse than initially anticipated, resulting in a record selloff of shares. As a result, the company has placed its CEO, CFO, and principal accounting officer on administrative leave while an internal investigation into accounting practices and controls is conducted.
The investigation has led to further delays in the release of Chemours’ fourth-quarter results and the filing of its annual report. The stock has dropped by 31.6% in afternoon trading, reaching its lowest close since September 2020. This decline is also on track to be the largest one-day selloff since the company was spun off from DuPont de Nemours Inc. in July 2015. Prior to this, the stock had already experienced a 12.6% decline on February 13 when the postponement of fourth-quarter results was announced.
The internal review is being overseen by the company’s audit committee and conducted with the assistance of outside counsel. It encompasses various aspects of Chemours’ operations, including reports made to the company’s ethics hotline, practices related to managing working capital and executive incentive plans, potential weaknesses in financial reporting controls, and the overall management approach set by senior executives. In light of these developments, CEO Mark Newman, CFO Jonathan Lock, and PAO Camela Wisel have been placed on leave. Denise Dignam, the current president of the Titanium Technologies unit, has been appointed interim CEO, while Chief Enterprise Transformation Officer Matt Abbott will serve as interim CFO.
In addition to the accounting concerns, Chemours expects to report a significant swing from net income to a net loss for the year. The company anticipates a loss ranging from $225 million to $235 million compared to a net income of $578 million in the previous year. This shift is primarily attributed to litigation settlements and restructuring charges, as well as the sale of the glycolic acid business.
Furthermore, Chemours forecasts a 12% decline in net sales for 2023, amounting to $6 billion. This projection falls slightly below the current FactSet consensus of $6.07 billion. The company’s stock performance has been lackluster this year, with a decline of 37.7% compared to a 2.5% gain for the Materials Select Sector SPDR exchange-traded fund and a 6.7% increase for the S&P 500 index.
Chemours’ stock decline serves as a cautionary tale for investors, highlighting the importance of thorough due diligence and transparency in financial reporting. The severity of the accounting concerns has not only affected the company’s financial stability but also eroded investor confidence. As Chemours continues its internal investigation and navigates through these challenges, stakeholders will closely monitor the actions taken by interim leadership to restore trust and rectify the accounting issues at hand.
