Disney stock took a hit this week after shocking accusations of inflated revenue reports. | Source: Shutterstock
The accountant was a senior financial analyst in the company’s revenue – operations department. Her allegations are that employees repeatedly overstated revenue in the parks and resorts business segment by billions of dollars.
Disney has denied the allegations. The SEC has not commented, but never does in matters under investigation.
Finding The Truth
Investors need to evaluate the possibility that the allegations are accurate, whether the SEC will or will not take action, and what effect that might have at Disney with regards to its financials.
Ed Butowsky, Managing Partner at Chapwood Capital Investment Management, tells CCN:
“Just because someone sends in a whistleblower claim to the SEC does not mean that the claim has any validity, or that the SEC will act on it. The SEC historically puts most of its limited resources towards two things: people engaging in fraud that allows them to steal other people’s money, and fraudulent accounting at public companies.”
There are several clues that indicate the SEC is taking the allegations very seriously.
The SEC receives over 25,000 whistleblower complaints every year and has limited resources. The fact that the agency has allegedly met with the whistleblower several times is a strong indication that they take the allegations seriously.
This would be supported by the fact that the whistleblower is an 18 year veteran in financial analysis at a major corporation.