While everyone was busy celebrating new all-time highs, $ADM, the 35th largest company in the US [According to the last Fortune 500] and about to celebrate the 100th anniversary since their shares started trading on the New York Stock Exchange (they listed on December 24th, 1924!), crashed 24% in a single day, marking its biggest loss in a single day, even beating the 1987 plunge.
What exactly happened here? “Out of the blue,” the CFO, Vikram Luthar, was placed on administrative leave as the company discovered potential irregularities with its accounting practices in its Nutrition segment. Hilariously, $ADM was supposed to report results today (or tomorrow, January 23rd, for the readers in the US).
How did the company discover that its books might have been cooked? Here is the official excuse: they received a voluntary document request from the #SEC.
This is what CEO and Chairman, Juan Luciano, literally said in the last Q3-23 earnings about the Nutrition segment: “Within Nutrition, the outstanding growth of Flavours continues to outpace the market, and Health & Wellness is developing the next generation of evidence-based solutions, WHILE WE ADDRESS POCKETS OF SOFTNESS IN OTHER AREAS OF THE PORTFOLIO”. Yep, clearly we now know how that problem was being “addressed.”
With the benefit of hindsight, $ADM (a company with already a pretty good record of scandals in the past) engaged in a pump and dump scheme.
Phase 1 – “The Markup”
This can be as simple as releasing a fake news report or it can be as complex as a coordinated effort of press releases, fraudulent case studies, and TV coverage. There is plenty of material on $ADM here, starting from their own website, of course (Picture 1).
Phase 2 – “Distribution”
This is the phase when the hype continues, but insiders start slowly dumping their shares, trying to remain unnoticed. Now, I bet every one of you will rush to check the Insider Trading activity filed with the SEC.
What did you expect? To find there, black on white, every single transaction? 🤭 Funny enough in the past 12 months the “Buy” exceeded the “Sell” transactions (that, with the benefit of a hindsight, might have been engineered on purpose) [Picture 2].
Of course, in such a type of scheme, those who are involved will make sure to cover their trail; this is why they are very hard to investigate and prosecute. However, as you can see from the
@unusual_whales post below, the fingerprints remain on the tape. Now, I bet everyone will start scrutinizing the options activity between 2020 and 2022.
Phase 3 – “The Crash”
Here is when news usually comes out of nowhere and bam! 💥 This $ADM case is almost comical; basically, the SEC sent them a routine email just asking for documents and the company’s reply was “Oh crap, we might have cheated!”.
Now, let’s be honest here, how many #stocks right now would perfectly fit into the scheme I just described? Sadly, a very large amount, but hey! Let’s #FOMO into them until the music doesn’t stop (because the ceiling of the theatre collapsed)!
After collapsing 24% in a day and already a good track record of scandals and mismanagement throughout its history, $ADM has all it takes to become a star member of the #meme #stocks club along $WE $HTZ $LCID $CVNA, and so on. I hope for the 42,000 employees of $ADM that the scandal isn’t bigger, although usually where you find a cockroach, it means there are many more around.