Shares of Bidz.com (NASDAQ: BIDZ) are down around 4% today after the company announced fourth quarter results that can only be described as strange.Where to begin? Sales for the fourth quarter of 2008 were $35.1 million, compared with $63.2 for the same quarter in 2007. That's a decline of about 44% but for the full-year, sales were up 10.8%. The real juice, though, was this little nugget buried at the very bottom of the earnings release under the auspicious headline "2008 Highlights and Accomplishments":
The Company was notified recently by the SEC of a formal investigation relating to certain aspects of its inventory accounting practices, as well as other matters. The Company intends to fully cooperate with the SEC regarding this matter. The Company remains confident its inventory accounting is correct and in full accordance with GAAP.
Just so you know: A formal investigation is a big deal.
According to Disclosure Insight, notification of a "formal investigation" is the most serious news you can get from the SEC outside of some sort of enforcement action. The main difference between a formal investigation and an informal investigation is that a formal investigation gives the SEC power of subpoena, and according to CFO, "Companies almost always consider the launching of a formal investigation to be a material event requiring disclosure under securities laws."
Ex-con turned white collar crime fighter Sam Antar has been blogging about Bidz' strange inventory accounting practices for months. This should be an interesting case to follow.
Ex-con turned white collar crime fighter Sam Antar has been blogging about Bidz' strange inventory accounting practices for months. This should be an interesting case to follow.
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