Posted by LAM Xin Hui, Year 4 undergrad at the School of Accountancy, Singapore Management University
Posted by Nureen CHAN Wan Wei , Year 4 undergrad at the School of Accountancy, Singapore Management University
When Energy Conversion Devices Inc. needed cash, the struggling solar-panel maker turned itself into what Wall Street likes to call a “Happy Meal.”
To make $316 million in bonds more appetizing, the company agreed to lend millions of its shares to hedge funds buying the bonds so they could simultaneously sell the stock in a bet against Energy Conversion’s success.
A subsequent crisis in the solar-power industry hit Energy Conversion hard. The bonds, issued in 2008, plunged in value, and last year the company filed for bankruptcy protection, wiping out shareholders. But the negative wagers paid off for the hedge funds. A Wall Street Journal examination showed that hedge funds that bought the bonds were positioned to earn upward of 20% on their investments. Continue reading
Noble’s Iceberg Rebuttal Gets Few Prizes for Transparency
March 6, 2015 7:10 a.m. ET
One of Asia’s largest commodities-trading houses is trying to convince investors that its accounting is transparent. The whole exchange offers a reminder, though, that the very business of trading commodities is opaque. Singapore-listed Noble Group late Thursday issued a rebuttal of claims by Iceberg Research, a little-known entity that has published two reports since mid-February questioning Noble’s accounting. It is impressive that Noble responded just a week after Iceberg’s second report, perhaps one reason its shares rose 5% Friday.
Yet the stock still is down some 12% since Iceberg’s first report came out. Speed aside, Noble’s response left some questions unanswered.
Iceberg’s first allegation was that Noble carried the stake it held in Australia-listed coal miner Yancoal at $678 million on its books at the end of 2013, when the market value was a fraction of that. Noble partly addressed this issue by writing down the asset to $322 million last week. That write-down seems too little, though, considering the market value currently stands at only $8 million. Noble classifies the miner as an “associate” despite holding a stake of just 13%, and values it through its own projections of what Yancoal’s cash flows will be. Noble suggests the market price of Yancoal matters less, since it is a thinly traded stock. Even so, at least investors can plainly see that price in contrast to Noble’s in-house projections. Continue reading