Deloitte’s James T. Adams was just trying to do a deep dive into the business, to really get a good feel for the nuts and bolts, the ins and outs, and the what have yous, all of which the Securities and Exchange Commission apparently frowns upon. Read more »
How Else Is An Auditor Supposed To Get A Good Look At A Casino’s Books Than By Borrowing $478,000 To Gamble And Hiding It From Everyone?By Bess Levin
After an exhaustive six-week long search, during which time it went without audited financial statements, nutritional supplements company and alleged pyramid scheme Herbalife has picked one of the three remaining options for the job. Read more »
Herbalife Asks Investors To Close Their Eyes And Imagine That It Did A Big Debt-Financed Stock BuybackBy Matt Levine
A theme these days seems to be that if you can dream up a debt product, people will buy it, as long as the coupon is low enough. Take your pick of UBS’s 7.625% 10-year coco that is in some loose sense junior to its common equity, 2013 looking like a record year for covenant-lite loans, the return of private-label RMBS with weak reps and warranties, or the fact that Rwanda recently issued a 6.875% 10-year bond. Here’s something that won’t fly though:
Herbalife Ltd. recently halted plans for a debt offering that would have raised cash for stock buybacks after auditor KPMG LLP resigned earlier this month, Chief Financial Officer John DeSimone said Tuesday.
The nutritional-supplements company was in the process of “putting together a meaningful new debt arrangement that if done would be used to buy back stock,” Mr. DeSimone said on Herbalife’s quarterly earnings call.
Those plans were put on hold after KPMG abruptly resigned as the company’s auditor earlier in April following revelations that one of the accounting firm’s former partners had divulged confidential information about his clients to a friend who used it to trade. The resignation left Herbalife without audited financial statements.
“We were going down that path, and that path has now been blocked,” Mr. DeSimone said, adding that Herbalife is reviewing other options with banks.
Here is today’s earnings call on which DeSimone said that, and here is Herbalife’s sad 10-Q, with financial statements stamped “(Unaudited and Unreviewed),” which is … I’m sure not unprecedented but not quite contemplated by the SEC’s rules either.1 Perhaps it should be. Like, “if you’re filing unreviewed financials, you should print them in a different font, Comic Sans or something.” Read more »