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ArcBest Calls Stock Analysis Reporting ‘Defamatory’

4 min read

ArcBest Corp. (ARCB) of Fort Smith saw its stock take a sharp dive last week in the wake of a research report by Off Wall Street of Cambridge, Massachusetts.

Shares of ArcBest closed Friday, Sept. 14, at $49.25. By mid-morning on Monday, the price had dropped more than 6 percent to $45.85.

(By noon Thursday, the price had crept back up to $47.40)

Off Wall Street, a consulting firm that touts its short-sell recommendations, issued a report that pegged ArcBest’s price target at $35.95. No big deal, right? Research firms and financial institutions are regularly issuing such recommendations.

This time, however, a follow-up news report by StreetInsider.com said an accounting problem was one of the issues Off Wall Street had raised. As the stock price dropped, ArcBest did damage control: Vice President of Investor Relations David Humphrey told Freightwaves there were no “accounting irregularities,” an implication that would obviously cause serious brand damage.

When I emailed Humphrey for elaboration, he forwarded my questions to Kathy Fieweger, ArcBest’s chief marketing officer.

“We don’t comment on the many research reports that come out on the company all the time, but in this case we felt compelled to respond to media outlets that reported on this one because the information they reported about accounting problems was wrong and defamatory,” Fieweger wrote in an email. “We don’t really have anything to add beyond that and have not commented on the Off Wall Street report.”

Brad Delco covers transportation companies, including ArcBest, for Stephens Inc. in Little Rock, where he is a managing director.

“Judy McReynolds is extremely well regarded in this industry, and it is almost laughable that someone could make that [accounting] claim,” Delco said. “The only way you could is by not knowing the integrity of the people that work there. That’s the most important point: One could argue that ArcBest is too conservative, but it’s a real shame someone would make a claim like that regarding a company as highly regarded for open and transparent communication with Wall Street.”

Delco said he wouldn’t comment on whether he had seen the original Off Wall Street report that started the snowball rolling, nor did he want to cast any aspersions on anyone in the journalism world. Delco said the Off Wall Street report — which he may or may not have seen — discussed issues at ArcBest that weren’t news to the investing community.

“I would not necessarily comment on other people’s research, but I would tell you that I don’t believe the Off Wall Street report suggested any accounting irregularities,” Delco said. “I think that was a fabricated or false report in regards to the research report. I’m not going to comment on whether I’ve seen the report or not, but I would tell you I feel very strongly that was truly the case.”

The raisin in the cookie is ArcBest’s multiemployer pension plans. In June, the company reached an agreement on a five-year labor agreement with the International Brotherhood of Teamsters, and the company contributes to 25 multiemployer pension plans.

When it agreed to the new contract, ArcBest paid a one-time withdrawal fee of $37.9 million to restructure its participation in one fund. If it had to withdraw from others, it would stand to reason there would be a hefty charge as well.

“The items we believe were referenced in the Off Wall Street report are not new, particularly related to the ArcBest’s multiemployer pension,” Delco said. “It’s not accounted for as a contingent liability because it isn’t one and wouldn’t need to be considered a liability unless there was an event or catalyst that would trigger the withdrawal liability.

“I know the issue well. There’s nothing wrong with what ArcBest is doing, and most investors are very much aware of treatment of this multiemployer pension issue.”

Delco said he didn’t think the fallout from the hullabaloo would have much effect on “professional investors,” who know how to figure out what’s real or not.

“An individual can short a stock and publish a report like this, the stock goes down and that individual can make money; don’t put it past people to do that,” Delco said. “Investors will do their own work and research and realize this is much ado about nothing.”

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