Wal-Mart Stores, Inc.(NYSE:WMT) Sheds About $12 billion in Market Value On Bribery Allegations
Wal-Mart Stores, Inc.(NYSE:WMT) have lost $10 billion of its market value since 23 April, 2012. The news of the company being engaged in a multi-year campaign of bribery to expand its business hindered the company’s market share. The stock has lost about 4.50% over the past two-week.
The investigation launched by the two U.S. lawmakers namely Elijah Cummings and Henry Waxman, were turned into allegations and published in the New York Times article. This allegation drove the authorities to investigate the matter. Wal-Mart my have defied the U.S. Foreign Corrupt Practices Act (FCPA), which forbids bribes to foreign government officials, as well as run afoul of Sarbanes-Oxley rules that require corporate gatekeepers to report material violations of securities laws, if the allegations turns out to be true.
The 69 percent shares of Wal-Mart de Mexico owned by the Wal-Mart and popularly known as Walmex, dipped by 12 percent to 37.89 pesos ($2.88). Rubbing off $ 10 billion of their market value, shares of Wal- Mart fell to $59.54, reflecting a fall of 4.7 percent. The stock is a component of the Dow Jones industrials index, which ended 0.8 percent lower.
With reports from the New York Times suggesting Wal- Mart of paying bribes, the company’s expansion plans are kept at thaw. Denying of any details on the matter, the company said that it disclosed the probe to the U.S. Department of Justice and the Securities and Exchange Commission. However, the company’s growth could be hurt both domestically and abroad by the bribery allegations. Looking the situation from a positive strain provides opportunities to the prospective buyers to buy the shares that had been trading near a 52-week high.
However, the California State Teachers’ Retirement System (CalSTRS), which holds over 5.5 million shares of Wal-Mart Stores, keeps its faith alive on the Company saying that will keep its exposure to the retail giant until it finds out what happened.
With the hedge fund managers stating Walmex as an interest for short seller, Walmex first quarter earnings did not lived up to the expectations of the analysts. Also with the lawyers anticipating shareholder lawsuits reproachingl the company of securities fraud for having inflated its stock price by misleading investors about its FCPA compliance, the shareholders could use ballot box. The shareholders could vote out directors they deem responsible for allowing the bribery, including the four independent directors who comprise the audit committee, at Wal-Mart’s June 1 annual meeting. However, nearly 50 percent of Wal-Mart’s shares are owned by the family of deceased founder Sam Walton, which may mute the power of other shareholders.