UPS Stock Rises Despite $45M SEC Penalty Over Freight Business Valuation: Retail’s Stuck In 'Neutral'
By Stocktwits Inc | First Published Nov 22, 2024, 9:37 PM ISTThe regulator said UPS relied on an outside consultant’s valuation of Freight without providing them necessary information for a fair valuation of the business.
The Securities and Exchange Commission (SEC) said on Friday that United Parcel Service Inc. ($UPS) is facing a penalty of $45 million for materially misrepresenting its earnings as it failed to follow generally accepted accounting principles (GAAP) in valuing one of its worst performing businesses.
The SEC explained that in 2019, the company had determined that UPS Freight was likely to sell for no more than about $650 million.
Latest Videos
“GAAP required UPS to use the price it would receive to sell Freight in calculating whether it needed to write-down the value of the goodwill it had assigned to the business unit on its balance sheet. UPS’s own analysis indicated that nearly $500 million of goodwill it had associated with Freight was impaired,” the regulator said.
UPS relied on an outside consultant’s valuation of Freight without providing them necessary information for a fair valuation of the business. Subsequently, the consultant estimated that Freight was worth about $2 billion – three times the valuation determined by the company.
The SEC said that UPS did not record a goodwill impairment in 2019 and had it properly valued Freight, its earnings and other reported items would have been materially lower.
“In addition to the civil penalty, UPS, without admitting or denying the SEC’s findings, agreed to cease and desist from further violations of these provisions,” the regulator stated.
Despite the negative news, shares of UPS rose nearly 2% on Friday. Retail sentiment on Stocktwits was trending in the ‘neutral’ territory (45/100) compared to ‘bearish’ a day ago.
Shares of UPS have lost over 15% on a year-to-date basis.
For updates and corrections email newsroom[at]stocktwits[dot]com.<
subscribe to Asianet Newsable WhatsApp channel by clicking here. For more reliable and latest news
subscribe to Asianet Newsable Telegram channel by clicking here.