Michael, depends on the assertions.
As you point out, AREM had some assertions made against it that were amenable to a simple enough audit. Contracts could be produced and the other parties could be asked to validate that they had signed the contracts for those amounts.
I have agreed that it looks like AREM is an example of a company that puffed up their numbers. Depending on what is found out, it may deserve to lose 20% of its value, or 99%. I have no idea which. Given that the shorts have already helped knock the price down, it could even be worth MORE than the current price based on the audited numbers. I doubt it is an outright fraud, but I would not want to invest in a company that was not aboveboard and honest.
I suspect that many other assertions against AREM are baseless. That always happens when people pile on one accusation after another. Some can not easily be validated or disproved, especially some things that the company may want to keep private. Can a company comment on whether they have a contract to do something for the CIA?
I think you answered the question partially, but not completely. You remind me of lawyers who tell their clients to say NOTHING to the authorities even if they are innocent and wait for trial. In some cases, that is wise. In many, it is completely the wrong thing to do. For example, if you have an ironclad alibi and can avoid being charged, why not come out and say so. The alternative may be to spend time in prison without bail until your trial time and then PAY big bucks for a long trial that may find you innocent but with a sore butt.
I think it is a matter of degree. If an accusation is silly, ignore it or release information that disproves it. If it is causing serious problems for the company that may slow down progress or chase away clients or raise your costs or that knock the stock price down enough that investors complain loudly, why not attack the source of the problem using a reasonable amount of effort and cash.
If nothing else, it may keep others from doing something similar.
Imagine being a company accused of selling a product with an impurity, like a rat in a coke bottle or pins in marshmallows. The bad PR can cause lots of problems. Sure, you can settle the case out of court. Or, you can hire professionals who prove the people involved have done similar scams before to extort cash and you can press charges against them and make sure the press covers the retractions as loudly as they covered the fake accusations. All this will cost money but may stem a rash of copycats and may even give you positive PR as people hear what stringent standards you have for cleanliness in your products and how certain you were the accusers were lying.
As I see it, there is room for a company to defend itself, in moderation. Press releases that try to correct the record are cheap and reasonable. Sending a letter through an attorney demanding a retraction is reasonable. Spending millions is rarely reasonable unless they can expect to get back the money in some sort of damages.
But, assuming that any attempt to fight back means you are guilty is silly.
I think that people like Asensio make most shorts look bad because they spend lots of money trying to knock a stock down actively. They can end up spending millions in court defending themselves and pay fines. Perhaps they should take your advice and back off or plead guilty rather than defending themselves. After all, it makes them look guilty. |
