Chicago Bridge & Iron slips on "creative accounting" allegation

|About: Chicago Bridge & Iron Co... (CBI)|By:, SA News Editor

"Management has misled shareholders and analysts into believing that nothing is wrong with its Shaw Group acquisition or business," writes Prescience Point, arguing Chicago Bridge & Iron (CBI -2%) used "creative acquisition accounting" to create a $1.56B loss reserve.

CB&I, says Prescience, is struggling with certain Shaw contracts that could prove to be severely loss-making, and is using said reserve to mask their impacts.

"We believe CB&I will be forced into a goodwill write-down or financial restatement, either of which would trigger debt default, heightening the risk of liquidity crisis or dilutive equity raise." The stock, says Prescience, is worth about $37 per share, about 50% below the current level.