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Apple Believes SEC Investigation Poses Risk

MacRumors

MacRumors

macrumors bot
Original poster
Apr 12, 2001
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In Apple's quarterly 10Q filing, filed last Friday, Apple acknowledged the ongoing SEC investigations into the company's past stock options backdating practices as a considerable risk, and adds that the potential exists for further delay of SEC filings and possible delistment from a prestigious NASDAQ market.

The internal review, the independent investigation, and related activities have required the Company to incur substantial expenses for legal, accounting, tax and other professional services, have diverted management’s attention from the Company’s business, and could in the future harm its business, financial condition, results of operations and cash flows.

While the Company believes it has made appropriate judgments in determining the correct measurement dates for its stock option grants, the SEC may disagree with the manner in which the Company has accounted for and reported, or not reported, the financial impact. Accordingly, there is a risk the Company may have to further restate its prior financial statements, amend prior filings with the SEC, or take other actions not currently contemplated. Additionally, if the SEC disagrees with the manner in which the Company has accounted for and reported, or not reported, the financial impact of past stock option grants, there could be delays in filing subsequent SEC reports that could subject the Company’s common stock to potential delisting from the NASDAQ Global Select Market.
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The report also addresses many other risks facing the company that often go un-noticed (i.e. economic conditions, war, terrorism, etc.), however the acknowledgment nevertheless comes as a reminder that the SEC's investigation of Apple's accounting practices remains ongoing.

Note that delistment from the NASDAQ Global Select Market does not necessarily mean delistment from the general NASDAQ market. The NASDAQ Global Select Market, created in July 2006, is for companies that satisfy the "highest initial financial and liquidity qualifications."

Raw Data: Apple's Quarterly 10Q (pdf)


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Article Link
https://www.macrumors.com/2007/02/05/apple-believes-sec-investigation-poses-risk/
longofest

longofest

Editor emeritus
Jul 10, 2003
2,924
1,682
Falls Church, VA
P-Worm said:
Has anyone heard why the SEC is taking so long? What are the suspicious of in particular?

P-Worm
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The grant to Steve in December 2001 is what they are most concerned about. They are taking a while because there was falsified documents involved, and whenever you have those involved, its hard to get at the truth.
 
R

roy_dan

macrumors newbie
Oct 8, 2003
28
0
Good Business

Hey, they're just trying to be honest. It's not the end of the world and I believe they will come out stronger in the end.
 
Analog Kid

Analog Kid

macrumors G3
Mar 4, 2003
8,860
11,380
Every 10-K/Q includes a "doom and gloom" section that list of potential risks to the company, ranging from the very real to the fanciful. This statement, in itself, doesn't mean anything more than that. No news here, really-- we knew the investigation was happening, and the consequences are usually worst-case scenarios lest the be sued later for painting too rosy a picture.
 
E

Evangelion

macrumors 68040
Jan 10, 2005
3,374
147
hopefully this debacle makes companies realize that stock-options are retarded. instead of giving employees possibility of buying shares at a discount at some future date, why not simply give them bunch of shares at market-price, with the condition that they can't sell them for certain time-period and/or until shareprice reaches certain level? because with options they can make money even when shareprice goes down? well, why should they be rewarded then? why should some execs be rewarded when they do a crappy job?

options are just a "get rich quick"-scheme. bunch of execs giving each other even more money...
 
Stridder44

Stridder44

macrumors 68040
Mar 24, 2003
3,973
198
California
In English?


Stella said:
Personally, I'm looking forward to the Apple Fan Boi's opinion of this - no doubt it'll be "Some ongoing conspiracy against Apple. How dare Apple be investigated this long - since Apple are God-like and can do no wrong"!!!
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Personally, I'm looking forward to someone to saying something stupid regarding "Apple fanbois" and make themselves look like an ass.
 
gnasher729

gnasher729

Suspended
Nov 25, 2005
17,980
5,565
Analog Kid said:
Every 10-K/Q includes a "doom and gloom" section that list of potential risks to the company, ranging from the very real to the fanciful. This statement, in itself, doesn't mean anything more than that. No news here, really-- we knew the investigation was happening, and the consequences are usually worst-case scenarios lest the be sued later for painting too rosy a picture.
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To explain a bit further: If anything bad happens to a company, and the share price drops because of that, there will be some ambulance-chasing lawyers who try to make money by suing the company on behalf of the shareholders (who are usually not asked whether they actually want to sue or not). However, if whatever bad thing happens has been mentioned as a possibility in the 10-K/Q statement, then the company can relax and say "Look here, we told you this might happen, and you still bought or kept our shares, so it's your own fault". If anything bad happens that was _not_ mentioned as a possibility in the 10-K/Q, that's a problem. So anything that is remotely possible goes in there.
 
echeck

echeck

macrumors 68000
Apr 20, 2004
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Boise, Idaho
We all knew this investigation was happening, so things aren't any worse off than they were last week.

This is basically just a required disclaimer, nothing more.

On the flipside, if investors get cold feet and Apple stock drops back to around $50, I'll be buying. ;)
 
Peel

Peel

macrumors 6502a
Aug 30, 2004
579
89
Seattle
gnasher729 said:
To explain a bit further: If anything bad happens to a company, and the share price drops because of that, there will be some ambulance-chasing lawyers who try to make money by suing the company on behalf of the shareholders (who are usually not asked whether they actually want to sue or not). However, if whatever bad thing happens has been mentioned as a possibility in the 10-K/Q statement, then the company can relax and say "Look here, we told you this might happen, and you still bought or kept our shares, so it's your own fault". If anything bad happens that was _not_ mentioned as a possibility in the 10-K/Q, that's a problem. So anything that is remotely possible goes in there.
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My thoughts exactly. However, I still expect this acknowledgement of the facts (that everyone already knows) to have a temporary negative affect on the share price.
 
W

Whistleway

macrumors 6502
Feb 16, 2005
347
0
Just when things seemed rosy on Apple land. I think Apple's way of dealing with SEC is just not conducive to a rapid closure. Come on Apple, get your act together.
 
T

tribalogical

macrumors member
Apr 10, 2003
67
0
tokyo, japan
yep, it's called a "disclaimer"....... of course ongoing investigations could cause additional expense, headaches, de-listings, god knows what else.....

And they have to mention pretty much any and all possible disasters and whatever else that could affect the bottom line... war, SEC investigations, market forces, you name it, it all goes in there. It's partly about "managing investor expectation", aka providing an ongoing 'reality check', as it is about covering their corporate behinds....

[...reaction to troll...]

So we all wish them well, hope the distractions end soon, and that whoever is responsible goes to prison!!!! (I jest)

uh, as long as it isn't our favorite demi-god/Reality-Distortion-Field-Wizard-of-Woz, Stevie-J!! :cool:

Apple, and we the Apple-appreciating community, need Steve Jobs at the helm.... I say that as a (very happy) shareholder, by the way!!

peace,
tribalogical
 
Rocketman

Rocketman

macrumors 603
Dec 2, 2001
6,191
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Claremont, The intellectual capitol of the world.
Whistleway said:
Just when things seemed rosy on Apple land. I think Apple's way of dealing with SEC is just not conducive to a rapid closure. Come on Apple, get your act together.
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They did an internal investigation, restated some items, turned it ALL over to the SEC on hopes full cooperation and internal correction would do the trick. Remember well, the issue they are rooting out is one which was common practice before, was endorsed by the accounting firms, and was thus and therefore felt safe by management. Recent rule changes "clarified" the practice as being non-compliant and was written in such a way firms had to go "back in time" to comply. That is usually not allowed in law. It was here.

The SEC should make interim findings of folks they have "cleared" or something to indicate any company they are investigating has a "narrow scope" of inquiry.

It's not just Apple.

Rocketman
 
D

dscottbuch

macrumors member
Mar 13, 2002
85
35
tribalogical said:
yep, it's called a "disclaimer"....... of course ongoing investigations could cause additional expense, headaches, de-listings, god knows what else.....

And they have to mention pretty much any and all possible disasters and whatever else that could affect the bottom line... war, SEC investigations, market forces, you name it, it all goes in there. It's partly about "managing investor expectation", aka providing an ongoing 'reality check', as it is about covering their corporate behinds....

[...reaction to troll...]
So we all wish them well, hope the distractions end soon, and that whoever is responsible goes to prison!!!! (I jest)

uh, as long as it isn't our favorite demi-god/Reality-Distortion-Field-Wizard-of-Woz, Stevie-J!! :cool:

Apple, and we the Apple-appreciating community, need Steve Jobs at the helm.... I say that as a (very happy) shareholder, by the way!!

peace,
tribalogical
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While much of this is true, these are disclaimers, what I find most disturbing is that this is listed FIRST in the list of Risk Factors. It is required that these Risk Factors be listed in decending order of likelyhood and/or severity. If Apple could have buried this risk factor down the list they would have. Its placement indicated that Apple management has assesed that this is the number one risk factor the company faces.
 
A

Ahheck01

macrumors 6502
Aug 7, 2006
479
42
Stridder44 said:
Personally, I'm looking forward to someone to saying something stupid regarding "Apple fanbois" and make themselves look like an ass.
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I can't tell you how hard this made me laugh. Heck of a retort, sir. I give you props.

-Evan
 
Peel

Peel

macrumors 6502a
Aug 30, 2004
579
89
Seattle
Rocketman said:
It's not just Apple.
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No, it's not. And a negative finding by the SEC could send a shockwave through the entire high tech sector, as well as the entire stock market in general. Any company that followed the previously believed to be OK practice of granting options in this manner, will be sent scrambling to prevent a share devaluation across the board.
 
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