Shares of Chemours Co. experienced a significant selloff on Thursday as investors were shocked to discover that the accounting problems they were previously informed about were much more severe than initially thought.
Leadership Changes Amid Accounting Investigation
The specialty materials and chemicals company took immediate action by placing its chief executive, chief financial officer, and principal accounting officer on administrative leave while conducting an internal investigation into accounting practices and controls.
Delays in Reporting and Filings
As a consequence of the ongoing investigation, Chemours Co. announced further delays in releasing its fourth-quarter results and extending the filing of its annual report.
Stock Performance
The company’s stock (CC, -31.72%) plummeted by 31.6% during afternoon trading, heading towards its lowest closing price since September 2020. This marked one of the most significant single-day selloffs since its spinoff from DuPont de Nemours Inc. (DD, -0.39%) in July 2015.
Back on February 13, the stock already experienced a sharp decline of 12.6% when the company initially disclosed the need to postpone the reporting of fourth-quarter results by two weeks for a thorough evaluation of financial-reporting controls.
Internal Review of Chemours Company
The internal review conducted by Chemours, overseen by the company’s audit committee with assistance from outside counsel, covers a range of important areas:
Reports to Ethics Hotline
The review looks at reports made to the Chemours ethics hotline to ensure integrity and compliance within the company.
Management of Working Capital
Examining practices for managing working capital related to impacts on executive incentive plans.
Controls Over Financial Reporting
Assessment of “one or more potential material weaknesses” in controls over financial reporting to ensure accuracy and transparency.
Senior Management’s Leadership
Evaluation of the “tone at the top” set by senior management to foster a culture of accountability and responsibility.
Leadership Changes at Chemours
In response to recent developments, CEO Mark Newman, CFO Jonathan Lock, and PAO Camela Wisel have been placed on leave. Chemours has appointed Denise Dignam as interim CEO and Matt Abbott as interim CFO.
Financial Outlook for Chemours
The company anticipates reporting a significant shift in financial performance for the year:
- Net Loss: Expected range of $225 million to $235 million, compared to net income of $578 million
- 2023 Results: Include $746 million in litigation settlements, $153 million in restructuring charges, and a $106 million gain from the sale of its glycolic acid business
- Net Sales: Expected to decrease by 12% from 2022 to $6 billion, with analysts’ consensus at $6.07 billion
For more insights on Chemours’ litigation settlements, stay tuned for updates.
Chemours Stock Performance
Chemours’s stock has experienced a significant decline of 37.7% year to date, contrasting with the 2.5% increase in the Materials Select Sector SPDR exchange-traded fund XLB and the 6.7% rise in the S&P 500 index SPX.
This highlights the challenges faced by Chemours in the current market conditions and the disparity in performance compared to broader market indicators.
