Last week Avon, the US door-to-door and online cosmetics manufacturer, announced that the US Securities Exchange Commission (SEC) has placed it under formal investigation in connection with allegations of bribery in China.
Earlier this year Avon had announced that it was conducting its own internal investgation into possible corruption in a number of countries. It has previously suspended four executives. In a report dated 5th May 2011, Bloomberg reported:
“As part of the internal probe, Avon has discovered millions of dollars in questionable payments to officials in Brazil, Mexico, Argentina, India and Japan, The Wall Street Journal reported yesterday, citing an unidentified person”
At that point, only 6 months ago, Avon’s shares were reported as trading at $30.32 on the NYSE. By the time of the latest report – see The Times (London) of 28th October 2011 (online version by subscription only), Avon’s shares had reportedly dropped much further to $18.81.
Of course, the share price falls may relate principally to underlying declining business and profitability, but the continuing investigations by the company itself and now the SEC are likely to have had an additional impact on the perception of analysts and shareholders, who will be fearing a substantial penalty being imposed by the SEC which in turn could further affect the company’s profits.
We will continue to report on this story as it develops.