Samsonite International shares fell drastically at the end of May this year after a short seller report from Blue Orca Capital suggested that the world's biggest luggage manufacturer has poor corporate governance and substandard accounting practices. According to Blue Orca, the Samsonite company is currently concealing slowing growth through carefully-structured acquisitions and massaged accounting strategies intended to show inflated profit margins.
In a highly aggressive public announcement, Blue Orca Capital described Samsonite as a "mid-level" company pretending to be a luxury player. Of course, Samsonite responded to the report by saying that the views were one-sided and misleading. Despite the response, analysts suggest that the slanderous nature of the report could harm Samsonite's share prices in the years ahead.
How Is Samsonite Dealing with the Matter?
With a market value of $5.6 billion, Samsonite has requested a halt on share trending pending a statement on the matter. The company announced that they will not comment on the problem anymore at this time. Before the Blue Orca Report came to light, many analysts were on the "buy" side of the fence for Samsonite stock - according to Reuters data. In fact, the shares for the company hit a record high point of HK $38.60 in April.
In the Blue Orca report, the company was critical of the way that Samsonite apparently engages in related party transactions with entities that CEO Ramesh Tainwala owns. Blue Orca argued that the Samsonite accounting practices are not appropriate - including the ones it used to acquire the Tumi brand in 2016. The report indicates that Samsonite isn't worthy of the luxury brand status it holds for trading purposes.
Many argue that Samsonite trading practices should be subject to more auditing oversight. Tainwala argues that his company uses the highest levels of caution in auditing and accounting and that all inter-related transactions with his family are fully audited and regularly disclosed.
The Samsonite Stock Situation
By the end of the first day after the report appeared, Samsonite's shares had plummeted by 12 percent in the Hong Kong exchange. Despite the drop, Samsonite is still trading at almost double the value of Blue Orca's valuation at HK $17.59 per share.
According to a sales director at UOB Kay Hian, Steven Leung, Samsonite is responding very efficiently to the issue, halting its shares when it started to feel the pressure, and issuing statements to help clarify the situation. Of course, Blue Orca's argument that Samsonite isn't a traditional "luxury" brand isn't a new idea. Despite this, Samsonite - which currently holds a value of approximately $4.8 billion announced that they were reserving the right to take legal action.
For now, it remains unknown how Samsonite will react against the claims that Blue Orca is using to drag the value of the luggage company down. Samsonite claim that Blue Orca's report is false and "mischievous" and that they use the highest standards when it comes to their accounting strategy.
For now, Samsonite remains one of the top major foreign stocks listed on the Hong Kong exchange, alongside L'Occitane International and Prada.