Friday, February 13, 2009

Got Goodwill? Part 15: It’s All in the Timing

CBS announced a goodwill impairment, then got sued.

CBS issued a press release on October 10, 2008 announcing that it would to incur an impairment charge of approximately $14 Billion in the third quarter of 2008.

After the announcement, CBS common shares declined from $10.14 to $8.10. CBS closed this week at $5.81.

A more recent press release talks about an investigation of the timing of the CBS announcement and how alleged damages might have resulted to shareholders of various CBS plans.

The complaint alleges that CBS violated securities regulations by making materially false and misleading statements about its financial condition and operating results.

The complaint is a class action on behalf of former or current employee or members of CBS investment plans or profit sharing retirement plans or individuals who purchased CBS stock in one of those plans during the periods February 26, 2008 to October 10, 2008.

The complaint alleges that:
  • CBS failed to disclose that ‘adverse market conditions had materially impaired CBS's operations, expected cash flows and the value of its intangible assets, including goodwill'
  • CBS's goodwill and intangible assets were materially overstated'
  • CBS' positive statements that it 'clearly has the right broad range of assets to produce outstanding free cash flow quarter after quarter, year after year,' were materially false and misleading and without reasonable basis.
You can have a look at a graph of CBS share price in 2008 here.

Read the complaint here.
Malcolm McKay

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