Eurofins slumps after Muddy Waters allegations

24th Jun 2024 12:47

(Sharecast News) - Shares in Eurofins Scientific plunged by more than a fifth on Monday after activist hedge fund Muddy Waters accused it of financial regularities, saying it had taken a short position in the stock because the German laboratory company was "optimised for malfeasance".

Muddy Waters, led by Carson Block, said Eurofins' financials "could contain material overstatements of profits, cash balances, and other asset values".

It also alleged that founder and chief executive Gilles Martin has spent decades "covertly enriching himself by peeling off real estate portions of Eurofins' M&A transactions as early as 2005".

"As Eurofins grows larger, it makes smaller acquisitions, with 2019 acquisitions averaging $5m of annual revenue, which declined by 2023 to $3.1m. The vast majority of the acquisitions don't meet the threshold for disclosure, keeping much of the spending opaque," the Muddy Waters report stated.

"Such a sprawling, complex company as Eurofins seemingly needs a robust internal audit team. However, based on our interviews with former employees, Eurofins' internal audit function, which is based in Poland, leaves much to be desired," it added.

Reporting by Frank Prenesti for Sharecast.com