Friday's investor concerns, which brought medical device maker Lumenis (Nasdaq: LUME)down to a 52-week low, were apparently justified. The company reported today that the US Securities and Exchange Commission has requested documentation of its financials since January 1, 1998.
Lumenis emphasized that this is not an official SEC investigation, but an "unofficial request" to voluntarily provide information on its relationships with distributors and previous charges and write-downs in the period in question.
It appears that, based on Friday's nosedive to $13 or 50% below January share prices, news of the impending investigation leaked to the market during the day. The share lost another 31% at opening today, trading in the first minutes of trade at $8.92.
CEO Yacha Sutton today said, "This is not a positive development, but we have nothing to hide. Lumenis is relatively transparent and there is nothing improper to be found. In the short term the SEC request could depress the stock price further, but our core business is table and there will be no change in our $101 million Q4 revenues."
Sutton went on to say that it is unclear if news of the investigation leaked during Friday¿s trade although the share's behavior indicates it may have. It is also not clear what led to the SEC request. "We don't know exactly how this came about. Maybe a former employee or distributor or someone who is short selling the stock complained to the SEC. Many companies go through this process and we have no problem producing the documents."
The questions relate to the company's relationship with distributors going back to 1998, when it was under different management. Also in question are write-offs associated with the acquisition of US company Coherent in April 2001. "We fired 250 employees and closed seven branches worldwide, moves which involve one-time charges. We always detail what revenues we have neutralized and why. We reiterate our Q1 guidance of minimal write-offs and positive cash flow in Q2 2002."