Samsonite shares suspended again as company readies fresh response to short-seller attack
Luggage maker has already called accusations of questionable accounting by activist investor Blue Orca ‘misleading”, promises a further announcement
Shares in Samsonite, the world’s biggest luggage brand, were suspended from trading for a second time in Hong Kong on Monday, with the company saying it would make a further announcement in the wake of accusations by an activist investor last week.
US short-selling firm Blue Orca Capital had accused the company of questionable accounting practices and poor corporate governance in a report, triggering a near 12 per cent slide in the company’s share price last Thursday before the shares were briefly suspended.
The shares fell another 12 per cent when trading resumed on Friday, hitting a nine-month low of HK$26.80 and valuing Samsonite at US$4.8 billion.
The company said in a statement on Monday it had requested another halt “pending the release of a further announcement in relation to certain allegations contained in a report regarding the company, which may constitute inside information of the company.”
Samsonite had released a statement on Thursday evening which called the report “misleading” and “one-sided”.
The report by Blue Orca said that Samsonite was worth HK$17.59 a share, 49.7 per cent below its weekly high of HK$35 at the start of Thursday’s trading. It accused the company of inflating profit margins and concealing slower growth through debt-fuelled acquisitions, and called for more auditing oversight on transactions involving companies owned by Samsonite CEO Ramesh Taniwala and his family.
“Blue Orca’s statement is very detailed, but we have to see whether those accusations can be sustained by more evidence since Samsonite’s financial statements have been audited,” said Louis Tse Ming-kwong, managing director of VC Wealth Management.
“It is difficult to say when the shares might recover. Samsonite might need another quarterly result or annual result to prove that they are really making those profits. We’ve seen these incidents before, but it’s up to Samsonite management to make sure those figures are genuine,” he said.
Headquartered in Luxembourg, Samsonite reported a 21.1 per cent rise in 2018 first-quarter sales to US$888.2 million, while net profit rose 18.6 per cent to US$43.9 million.
Its aggressive growth strategy has involved several takeovers in recent years, including Colorado-based luggage e-retailer eBags for US$105 million in May 2017 and luxury luggage rival Tumi for US$1.8 billion in 2016. Samsonite first listed in Hong Kong in 2011, where it raised US$1.25 billion.
Blue Orca was launched by former Glaucus Research executive Soren Aandahl on May 17. In short selling, investors borrow stocks and sell them hoping the price will fall. If it does, they buy back the stocks at the lower price and return them to the owner, pocketing the difference.