Another Happy Day for Destructive Accounting
The shares of OHL Mexico, the Mexican subsidiary of Spanish construction behemoth OHL, soared over 10% to 26.72 pesos on Monday morning. It was the stock’s biggest climb in over 8 months.
The reason for the market’s new-found enthusiasm for the shares was somewhat counter intuitive: the company had just announced that it had been hit by the biggest fine ever imposed by Mexico’s securities authority, the CNBV. The company had been penalized for irregular accounting practices and was forced to pay 71.7 million pesos in damages — a $4-million slap on the wrist.
“The market did not award the company, it awarded the fact that the fine was less drastic than it could have been,” said Juan Carlos Minero, director of the investment fund Black Wallstreet Capital.
Even more important than the size of the fine were the market’s fears that the company could be forced to change its accounting practices. Those fears were well grounded given that the CNBV had already unearthed a number of serious accounting irregularities dating back at least five years. Yet despite that, no mention has been made of OHL Mexico needing to correct its ways, to the market’s obvious delight…
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