Chicago Bridge & Iron slips on "creative accounting" allegation

"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.

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Comments (9)
  • doug.whatzup
    , contributor
    Comments (209) | Send Message
    Yep, cause Warren Buffett is too stupid to do due diligence.
    17 Jun 2014, 01:37 PM Reply Like
  • rcpatrick5443
    , contributor
    Comments (900) | Send Message
    Thanks for your Chicken Little assessment based on ... oh, yeah, what's it based on, again ...?
    17 Jun 2014, 01:53 PM Reply Like
  • Hope128
    , contributor
    Comments (119) | Send Message
    Don't listen to this guy, he is very good at shorting at the bottom. He shorted $ACTV at $5 with PT of $1, turns out it was sold to VISTA for $14.5 with 1B cash deal in a few months. He downgraded $BDBD from $4 to $3 when the stock was $8, it doubled in 4 months. He always uses insolvent & accounting issues to scare retail investors.
    17 Jun 2014, 02:23 PM Reply Like
  • boris813
    , contributor
    Comments (20) | Send Message
    Great spot to buy some CBI calls. As Doug mentioned, Buffett holds almost 10% of CBI stock. Pretty sure he did his homework.
    17 Jun 2014, 03:19 PM Reply Like
  • GMNewt
    , contributor
    Comments (9) | Send Message
    My Husband has worked for CB&I for 42 years. This "report" is absurd! Prescience is the company committing fraud with their ridiculous lies.
    17 Jun 2014, 03:45 PM Reply Like
  • GMNewt
    , contributor
    Comments (9) | Send Message
    Also very manipulative, note the " Chicago Bridge & Iron slips on "creative accounting" allegation is their headline, appears not one else has picked up and run with it.
    17 Jun 2014, 03:45 PM Reply Like
  • odsmaker
    , contributor
    Comments (45) | Send Message
    Prescience Point is a short sale idea "research" company whose founders have "over 25 years of combined Wall Street experience" ..... less than I have, actually. Apparently, these young guys are trying to make a name for themselves, somehow. Seems to have worked for the shorts so far. CBI's valuation has been somewhat extended since Buffet's entry became common knowledge, thus the quick plunge with the exit of weak handed momentum traders. Perhaps we will now see a pack of securities litigation law firms jump on CBI in the next few weeks. That should provide patient investors with a good entry point.
    17 Jun 2014, 03:50 PM Reply Like
  • caveman2596
    , contributor
    Comments (96) | Send Message
    Thanks the report doesn't feel right to me either.
    17 Jun 2014, 10:09 PM Reply Like
  • abosij
    , contributor
    Comments (19) | Send Message
    Spent some time last night trying to comb through CB&I's financials, etc after the Prescience note. The fact do the matter is, I've never once heard of a seamless integration post acquisition. Cultures differ, internal processes differ, and it generally takes about 3-5 years to fully address inefficiencies in a good acquisition. Off course they're struggling Shaw contracts... Full IT integration will probably cost ~100 mil over time. In all, the question is, will CB&I's reputation, prestigious brand and ridiculous back log be impacted by your erroneous claims? I don't think so!!!
    18 Jun 2014, 08:48 AM Reply Like
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