Analyzing Market Manipulation and Valuation of a Distressed European Retailer

The Situation

The stock price of a European retailer declined by approximately 90% over a three-year period. The majority owner of the company then proposed to purchase additional shares. Regulators investigated claims that the company manipulated stock price by short selling, as well as claims of pushing the company into financial distress.      

NERA's Role

NERA was retained by counsel for the company to analyze allegations of market manipulation and evaluate the valuation of the retailer. The analyses included event studies, statistical analysis of short selling behavior, content analysis, and valuation analysis.

NERA’s analysis demonstrated that the behavior of the stock price was consistent with the decline in the company’s financial performance. The stock price change was consistent with changes to valuations of the estimated equity value using discounted cash flow and market approach analyses as of various dates. NERA also conducted content analysis to evaluate market evidence of the company’s solvency.  

The Result

The regulatory actions against the defendants were terminated and the matter settled without further action against the defendants.