Market Overview

IBM Sells Off Amid SEC Probe Related To Sales Accounting

IBM Sells Off Amid SEC Probe Related To Sales Accounting

  • Shares of International Business Machines Corp. (NYSE: IBM) hit a new 52-week low of $138.10 on Tuesday.
  • The stock heavily sold off after the company said in a 10-Q filing that the SEC has been conducting an investigation related to revenue recognition.
  • IBM said that it has been aware of an ongoing investigation since August 2015.
  • Shares of IBM sold off sharply on Tuesday after the company disclosed in a 10-Q filing that the Securities and Exchange Commission has been investigating potential wrongdoings at the company since August.

    Shares traded as low as $138.10 early Tuesday afternoon. The stock hasn't traded below the $140 mark since October 2010.

    The 10-Q

    The company stated in its filing, "In August 2015, IBM learned that the SEC is conducting an investigation relating to revenue recognition with respect to the accounting treatment of certain transactions in the U.S., U.K. and Ireland. The company is cooperating with the SEC in this matter."

    Related Link: Probes Reporter Expects Array Of Investigations At Valeant

    The 10-Q filing also acknowledged several ongoing investigative activities, specifically the company remains subject to "ongoing tax examinations and governmental assessments in various jurisdictions." The filling added, "The total potential amount related to these matters for all applicable years is approximately $450 million." However, the company believes that it will "prevail" on these matters and that the amount is "not a meaningful indicator of liability."

    'New' And 'Big' Disclosure

    Probes Reporter's John Gavin commented on IBM's disclosure. Speaking to Benzinga, Gavin said that the disclosure is both "new" and "big." He noted that the disclosure could imply IBM's management views the investigation as "potentially material."

    Gavin added that issues with revenue recognition is the number cause of a financial restatement.

    Image Credit: Public Domain


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