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

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Probes Reporter Sees 'Real Danger' In Alcoa's RTI Deal
  • In a research note issued Wednesday, Probes Reporter looked into Alcoa Inc (NYSE: AA).
  • The experts note that, “Happy Talk Aside, There’s Real Danger in That Recently-Closed RTI International Metals Acquisition.”
  • Shares of Alcoa were flat on Wednesday.

According to the report, investors should be more skeptical about Alcoa’s recent acquisition of RTI International Metals, Inc. (NYSE: 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.

Moreover, Probes Reporter said 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. 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." Moreover, they ask, 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 concluded.

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

Latest Ratings for AA

DateFirmActionFromTo
Oct 2019DowngradesBuyHold
Oct 2019MaintainsBuy
Oct 2019MaintainsOverweight

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