A report issued by a short-seller has impacted share prices of Chicago Bridge & Iron Co. (CBI) by as much as 7.2% to close at $68.19 yesterday as against $73.58 as on Jun 16, 2014. This is the second time in the last 3 months that shares fell sharply. On Apr 25, 2014, the company’s stock fell 5.2%. Notably, the shares of the company have plummeted 18.06% in the last one week of trading.
According to media reports, Chicago Bridge & Iron has falsified its financial statements to reflect inflated profitability levels. Further, these reports suggest that the company has been facing problems with some of the contracts which got into the company’s books after the acquisition of the Shaw Group in 2012. It has also been pointed out that the company’s share price is currently trading at higher levels than its actual valuation.
The reports further suggest that the company might write-off its goodwill or restate financials which could trigger debt default, thereby increasing the risk of a liquidity crisis.
However, Chicago Bridge & Iron has completely denied all the allegations and has disagreed with the assumptions of the short-seller.
Chicago Bridge & Iron leads the liquefied natural gas (LNG) storage niche market and is expected to benefit from the strong demand in the energy infrastructure market, especially for LNG.
CBI currently has a Zacks Rank #3 (Hold). Some better-ranked companies in the sector include Emcor Group Inc. (EME), Sterling Construction Co. Inc. (STRL) and Tutor Perini Corporation (TPC). All three carry a Zacks Rank #2 (Buy).
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