The auditors and president have just resigned, sending the stock price down in flames.
Addendum: Since I posted this, there has been a follow-up news release which paints a somewhat different picture and may offer investors some hope that all is not lost. Apparently, the president and secretary of the company (not the CEO) was accused of misusing corporate funds and was giving the auditors the run-around when they tried to get to the bottom of this. The stock remains halted and the whole picture is still very unclear. Stay tuned for the next exciting chapter in this stock market drama! Following is my original post…
Ooooh, not a fun way to start off a Monday morning! I woke up to this bit of bad news in my inbox: apparently the auditors of Assure Holdings have just resigned over a disagreement with the company. At the same time one of the directors, who was also acting president and corporate secretary of the company, also resigned. The auditor says there is a “reportable event” with respect to “unresolved issues”. Well, that’s clear as mud.
What is clear, is that this is bad news. I went looking through the notes I had made on this company when I first bought it last fall. “This company started out of nowhere a year ago and has been posting somewhat unbelievably high profits and climbing revenues. I am skeptical, but will buy in at a half position and hope that multiple future growth plans offset probably over-inflated current earnings.”
Hmmm. Maybe I should have paid more attention to my own notes!
Regardless, here we sit with a company whose stock price promptly fell by more than half on suspicion that its accounting may be somewhat suspect. At this point, we really have no idea what the company might be worth. It could be worth nothing or it could still be a worthwhile growth story. Conceivably now could even be a good opportunity to buy in, although that would take more cojones than I possess. The company naturally disagrees with the auditor. Perhaps they can iron things out. In the meantime, though there will be a dark cloud hanging over this stock.
When bad news like this gets released, I’ll often shoot first and ask questions later. However, when the price falls as much as it has, I start to wonder. I quite liked this story to begin with and was fully aware that the accounting might prove to be overly aggressive when I bought in. I’m not sure that I’m going to bail on this idea just yet. But if the stock price ticks back up or new information gets released, I may change my mind.
Unfortunately, the way that I have structured this website means that you, dear reader, are on your own with these sorts of decisions. You might not find out that I have sold the stock until my next semi annual review. I won’t be offering minute by minute updates on my activities and when bad news like this comes out, I often won’t say anything right away as I have to take care of my own knitting first.
Unpleasant as it is, this situation provides an excellent cautionary note. Bad things can happen to good portfolios. The stock market is a risky place. Assure Holdings could end up going to zero or it might not. Investing in individual stocks means you need to pay attention and brace yourself for the inevitable and periodic kick in the teeth. Over time, the occasional blow up gets offset by the more frequent successes but looking at my portfolio balance today vs. yesterday (down 3%), it still stings!