Vida,
Thanks for sharing your view on the litigation.
I am not a lawyer and don't know about the likely developments of this litigation.
However, I think, from what we've heard/read so far:
The inaccurate/misrepresentation in its accounts seem to be mainly relating to:
(a). the reporting of short-term debts under non-current liabs;
(b). the incorrect provisioning for some non-cash items (eg. write-offs of intangibles, and property asset value?)
(can someone add what I am missing here please?)
A couple of points here are:
1. Does such misrepresentation, especially (a). above directly lead to share price plunge/losses by shareholders?
(the assumption here is that for the claims to be totally legitimate, there should be a direct link)
The answer is clearly not, or not totally at least. The situation has been excerbated by the credit crunch. Had it not been for that, and CNP could have renewed its short-term borrowings and nothing could have happened.
2. If it is proven that the directors and the auditors - PWC are negligient in terms of financial reporting itself (forget about the shareholder loss here), their professional liab insurance should partially cover the claims.
It is a separate issue here, directors/auditors not fulfilling their duties.
3. In the worst case scenario, CNP is liable for the payment of claims (though it is not likely to be the inflated amount as claimed by the lawyers), there is always an option for them to set up a claim reserves fund of some sort, which is to be sourced from its future earnings/cashflow, and pay the shareholders gradually into the future.
(James Hardie case -asbestos claims is of a much worse situation, I believe, and they were doing something similar to this? from memory, though from my understanding they were very cunning and re-registered the company in Holland.
Correct me if I am wrong here. )
4. the point here is that shareholders would get nothing/little if CNP goes under.
Assuming some of the individuals/institutional investors joining the class order litigation still hold some CNP shares, they would also suffer more losses if there is too much negative publicity on the litigation, as is happening now.
The key thing here is that, if they want some fruits out of this whole exercise, they should be patient enough to let the tree grow healthily and bear fruit first. Otherwise, they are hurting themselves in a foolish way.
I am sure that the entities/individuals joining the class order litigation are smart enough to know this, and will handle the process appropriately. Otherwise, it is lose/lose for CNP management and shareholders, and the lawyers and the funding firm are the only winners.
5. Given the size and importance of CNP to the retail property trust sector here and in the US, chances of CNP going bust is very remote, as the liquidation sale of its assets would cause significant price contraction to the whole sector. This probably partially explains the government's recent tax reductions for foreign investment in property trust?
6. As mentioned numerous times by other people, the management contracts CNP holds form a large part of the intrinsic value of the business.
7. Additionally, the current complex organisation structure also made it difficult for lenders to liquidate the company.
8. Re recent staff resignation:
IMO, the nature of the job of a centro lease manager is not much of rocket science. The business itself is pretty straightforward and standardised, I presume anyone having spent some time doing this can handle the job well.
It is not a major concern.
(Vida, you are right, the media has got nothing to report and therefore sensationalised such a small matter.)
I presume there are still a lot of uncertainties over the next two weeks, with media unduly fuelling on potential trivial matters/negativities.
We will have to be more observant to the share price movements and get a hint from them. Unfortunately, it is not a perfect market and there are always leakages of info prior to its being known to the public.
Most of us, unfortunately belong to this group. We certainly need to be more alert to any signalling signs/movements.
Let's keep on sharing information on this forum.
Good luck to all of you!
Cheers, L