Chemours Co., a specialty materials and chemicals company, experienced a significant plunge in its stock value as investors discovered that the accounting issues previously disclosed were far more severe than anticipated. This revelation prompted the company to place its CEO, CFO, and principal accounting officer on administrative leave pending an internal investigation into accounting practices and controls.
The investigation’s findings led Chemours to further delay the release of its fourth-quarter results and the filing of its annual report. As a result, the company’s stock dropped by a staggering 31.6% during afternoon trading, reaching its lowest close since September 2020. This decline also marked the largest one-day selloff since Chemours was spun off from DuPont de Nemours Inc. in July 2015.
The initial concerns arose on February 13 when the company announced a two-week postponement of its fourth-quarter results to evaluate its financial-reporting controls. The ongoing internal review, overseen by the company’s audit committee and assisted by external counsel, encompasses various aspects such as reports made to the Chemours ethics hotline, management practices for working capital related to executive incentive plans, potential material weaknesses in financial reporting controls, and the overall “tone at the top” established by senior management.
Consequently, Chemours made the decision to place CEO Mark Newman, CFO Jonathan Lock, and PAO Camela Wisel on leave. In their absence, Denise Dignam, the current president of the Titanium Technologies unit, assumed the role of interim CEO, while Chief Enterprise Transformation Officer Matt Abbott became interim CFO.
In addition to these developments, Chemours provided an update on its financial performance. The company expects to report a net loss of $225 million to $235 million for the year, a significant decline from the previous year’s net income of $578 million. This loss includes litigation settlements amounting to $746 million and restructuring charges totaling $153 million. However, there was a silver lining as Chemours gained $106 million from the sale of its glycolic acid business.
Chemours also anticipates a 12% decrease in net sales for 2023, amounting to $6 billion. This projection slightly deviates from the current FactSet consensus of $6.07 billion.
The market response to these developments has been unfavorable, with Chemours’ stock plummeting by 37.7% year-to-date. In contrast, the Materials Select Sector SPDR exchange-traded fund has experienced a 2.5% increase, and the S&P 500 index has seen a 6.7% gain.
The future of Chemours remains uncertain as the internal investigation progresses. Investors and stakeholders eagerly await the conclusion of the inquiry and hope for swift action to rectify the accounting issues. In the meantime, the company’s interim leadership will face the challenge of restoring investor confidence and stabilizing the company’s financial performance.
