There are two words no investor wants to read in a press release:
Accounting Issues
Nothing makes me more thankful for my Xanax prescription than reading that I stock I own has just announced that an accounting review is now underway, and results will be delayed.
Thankfully, I sold my shares of Hain Celestial (NASDAQ: HAIN), a long time ago.
You see, on Monday, Hain Celestial announced that it would be delaying its annual earnings report due to “accounting issues.” Reps also confirmed that the company is unlikely to deliver on its 2016 guidance.
That’s the kind of news that makes investors run faster than Usain Bolt running from the Baltimore City Police Department after getting caught minding his own business.
No, it’s not surprising at all that the stock plummeted more than 30% after the news was announced. 
The question now, however, is whether or not there’s an opportunity here for traders to swoop in and make a few bucks.
Don’t Need the Headache
Following the blood-letting we saw yesterday with HAIN, there are now some analysts coming out and saying that the stock is oversold and at current levels, it’s a buy.
There are few things I love more than buying cheap shares of a stock that has been oversold. But in the case of HAIN, it’s not oversold at all. In fact, until these “accounting issues” are straightened out, HAIN is likely to shed at least another ten to 15% in the near-term.
You see, before this news broke, the stock was up about 30% for the year.
Some of this was the result of just your basic impressive growth and revenue numbers, but some of this is also the result of buyout rumors.
I don’t put much faith in rumors, but given the recent trend of larger food companies swallowing up organic and natural food producers, I wouldn’t dismiss such a thing. Especially considering the fact that last month it was reported that Coca-Cola (NYSE: KO) was seeking financial information on Hain Celestial.
Of course, even if Coca-Cola wasn’t looking to acquire Hain Celestial, the rumors alone were enough to spark increased buying volume.
But let’s assume that Coca-Cola is looking to pick up Hain Celestial.
If this is the case, then Coca-Cola is now looking at a potential acquisition target that may not be nearly as valuable as initially thought.
Hell, since the news broke of these “accounting issues,” the stock has lost about $1 billion of its market value.
One analyst has suggested that with HAIN being worth less than originally thought, Coca-Cola might seek to get HAIN at a deep discount. But I don’t buy that for a second.
If you were getting ready to buy a house for $500,000, then you found out that the foundation might be crumbling, would you try to put in a new offer of $400,000?
Who needs that kind of headache?
With this recent accounting news out the Hain Celestial camp, we may soon found out that the company isn’t worth nearly as much as previously reported. As well, with this news, investors have lawyered up. That alone is going to cost HAIN millions.
Truth is, I don’t enjoy writing about this.
I’ve long been a fan of Hain Celestial, and over the years have done quite well with that stock. And who knows? Perhaps after its independent review, this could turn out to be less of an issue than previously thought. But I wouldn’t risk it.
For now, stay on the sidelines until the smoke clears.
