Muddy Waters Scandal

Negative stories that affected company

On December 17, 2015 the research company Muddy Waters published a report on Groupe Casino’s financial performance and corporate governance. In this report, Muddy Waters stated that company is using financial engineering and accounting tricks in order to inflate their earnings “on paper”. It was noted that Casino’s financial statements available are “meaningless in understanding company’s poor health”. It claimed that in order to make their financial statements more attractive for investors, Casino reports the results of the businesses they are partly owning as they were its own financial results. Thus, by doing so, Groupe Casino is making its financials look less leveraged that it is in reality. In fact,

Shortly after, Casino answered by stating that the report “contains grossly erroneous allegations that the Group will answer in detail”. It also filed a claim to the Autorité des Marchés Financiers and it is not excluding the possibility to protect its rights in national court. However, Casino also announced its plans to dispose their assets to cut existing debt by more than €2bn in 2016. This announcement caused a 40 % fall in Casino’s share price, also partly because of the recession in Brazil, which is a main market for the company. In a meantime, Muddy Waters called this move of Groupe Casino as “an empty and desperate ploy to buy

So, as an example, Groupe Casino states that their gearing ratio is really small, however, according to my fair calculations it is as high as 80%. The discrepancy between company’s annual reports data and data obtained elsewhere (Morningstar, FT, Reuters, etc.). Usually, in annual reports data is at least twice higher and it can confirm Muddy Waters’ claim about financial engineering and accounting legal tricks used. There is almost no information about debt in company’s documents, what can potentially mislead investors.

CSR and stakeholders
Groupe Casino has extensive corporate social responsibility programs. Their CSR includes new approaches in business (using environmental-friendly products and practices), extensive programs for its employees, suppliers and local communities in areas it is operating. Casino’s CSR activities intend to boost its performance in every part of its business as well as to build strong reputation in front of all its stakeholders.
It order to provide meaningful decisions concerning its CSR policies, Casino has created a CSR Strategy Committee and invites regularly its main stakeholders to participate in Committee meetings.
The Casino’s CSR department has 3 main programs oriented to its main