A global retail pharmacy company and two of its former executives agreed to settle SEC charges for misleading investors.
According to the SEC Order, in June 2012, Walgreens Boots Alliance, Inc. ("Walgreens Boots") announced a two-step merger with Alliance Boots, GmbH, a European pharmacy-led health and beauty company. Walgreens Boots communicated to the market a projection that the combined entity would generate $9 to $9.5 billion in adjusted operating income. According to the SEC, Walgreens Boots, its former chief executive officer and its former chief financial officer neglected to disclose additional increased risk to investors. After approximately two years of reaffirming adjusted income projections of $9 to $9.5 billion, Walgreens Boots proceeded with the second step of the merger, but reportedly announced a new earning per share goal that had an operating income projection of $7.2 billion - a 20 percent decline over its initial goal. As a result of this new information, Walgreens Boots' stock price dropped 14.3 percent on the day of the announcement.
Walgreens Boots and its former executives were found to violate Securities Act Section 17(a)(2). As part of the settlement, Walgreens Boots will pay a $34.5 million penalty. Mr. Wasson and Mr. Miquelon each will pay a $160,000 penalty.
Commentary / Matthew Sadofsky
This recent action is another example of the Commission taking a reporting company's communications with its investors very seriously. Reporting companies should assess when prior disclosures could mislead investors and consider taking corrective measures to update investors and the general investing community promptly upon the discovery of new material information that could impact an investment decision of its stock. Furthermore, the Commission is more likely to provide enhanced scrutiny over projections of non-GAAP financial measures that adjust operating income and other GAAP measures that reflect projected performance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
