(Boursier.com) — Edenred rose timidly by 1% to 50.4 euros the day after a violent drop in the wake of the announcement of the opening of an investigation against Edenred Italia Srl and certain of its administrators and managers. This investigation relates to a public call for tenders launched in 2019.
According to the Italian press, Edenred faces allegations of bid rigging regarding this call for tenders. Even if the outcome of the investigation remains uncertain, the drop in market capitalization of €1.6 billion yesterday could prove exaggerated given the amounts involved, says Bryan Garnier: around €30 million in turnover according to his estimates, or 1.3% of the group’s total turnover.
Although it is difficult to predict the outcome of the lawsuits, the broker presents three hypothetical scenarios. In the first, Edenred is acquitted, and the prosecutor drops the case. In this optimistic scenario, the stock should quickly return to its previous valuation levels. In the second case, the firm was found guilty of bid rigging, but the failure to disclose was judged to be an involuntary omission and Edenred paid a fine. The amount of the latter is unknown, but the market reaction which caused a loss of 1.6 billion euros in market capitalization seems exaggerated given the case in question. Finally, third scenario, Edenred and its legal representatives are found guilty of aggravated fraud, bid rigging and deliberate administrative offenses, for knowingly concealing commercial contracts from Consip. In this case, the affair would materially damage the quality of the stock and raise serious questions about internal controls and governance. Even if the change in status can hardly be evaluated ex ante, the valuation multiple should adjust to a lower level.
Ultimately, even if the outcome of the legal proceedings remains uncertain, the broker doubts that the current case will significantly harm the long-term potential of the group. The company will release its 2023 results on February 27. BG hopes that management will take this opportunity to provide further information on the matter.
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