Weatherford International will pay a penalty
On September 27, Weatherford International (WFT) disclosed that the SEC (U.S. Security Exchange Commission) resolved the investigation into the company’s income tax–related accounting issues. Following the settlement, Weatherford International agreed to pay a civil penalty of $140 million.
What was the investigation about?
The SEC investigated Weatherford International’s alleged fraudulent accounting practices, reporting, books and records, and internal control provisions related to income tax accounting. According to the SEC’s order, Weatherford fraudulently understated income tax provisions by $100 million–$154 million in 2011 and 2012 with the objective to “better align its earnings results with its earlier-announced projections and analysts’ expectations.” The matter led to a restatement of its financial statements three times in 2011 and 2012. Two of Weatherford International’s former executives also agreed to pay charges following their involvement in the matter.
How did WFT’s share price react?
Weatherford’s stock received a negative reaction in the stock market following the announcement of the settlement with the SEC. On September 27, Weatherford International’s share price closed at $5.21—5.4% lower compared to the previous day’s closing price. In the past month, Weatherford International’s share price fell ~8%.
So, how much will a $140 million penalty weigh on Weatherford International’s finances? Let’s discuss that in the next part.