Probes Reporter Sees 'Real Danger' In Alcoa's RTI Deal

• In a research note issued Wednesday, Probes Reporter looks into Alcoa Inc AA.
• The experts note that, “Happy Talk Aside, There’s Real Danger in That Recently-Closed RTI International Metals Acquisition.”
• Shares of Alcoa are flat on Wednesday trading.

According to the report, investors should be more skeptical about Alcoa’s recent acquisition of RTI International Metals, Inc. RTI because, while management will probably emphasize the “post-deal happy talk,” looking deeper will bring some problems to light.

The RTI Investigation

About a month ago, the SEC confirmed enforcement proceedings at RTI remained ongoing. Now, new data suggests the investigation remains a risk, the note states.

Moreover, the analysts add, the way in which the SEC probe was disclosed does not provide the full story to investors. In fact, the experts suspect the investigation is “much worse than company filings suggest.”

For starters, they believe this is a formal investigation, although RTI has not said anything about it. Next, the experts “are troubled by some of the timing here. For example, the restatement [of the company’s financial statements, requested by the SEC] took place in Mar-2014. The company says the SEC contacted it in May. We know restatements are cat-nip for enforcement officials,” they explicate. Moreover, they as, why wait until August of 2014 to disclose it?

An update filed on April 30, 2015, “repeated in form and substance (almost verbatim, actually) what was disclosed earlier regarding this exposure. Even absent a change in text, its presence tells you management judged the exposure remained material and, therefore, had to be disclosed. This adds complications for Alcoa management tasked with making this deal work,” Probes Reporter analysts conclude.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.