Americanas case exposes the failures of the ‘guardians’ of the capital market


It was shortly after 12:00 noon on November 11, 2022. Fabiana Oliver was participating in her second conference call with analysts and investors from Americanas, the company she joined in July. She had taken over as director of investor relations at Americanas, a month before Sergio Rial, then chairman of the board at Santander, was announced as the new president of the retailer.

“We closed the [3º] quarter with a robust cash position of R$14 billion and a net debt position of R$5.3 billion”. public data of the company.

Exactly two months later, the market was stunned by the news given by Rial, about the existence of R$ 20 billion in “accounting inconsistencies” in Americanas’ balance sheet, an amount that had been accumulating “for at least seven years”.

Eight days later, on January 19, the company presented its judicial recovery: instead of R$ 14 billion, it declared to have only R$ 800 million in cash (which ended up being reduced to R$ 250 million, after the blocking of receivables by banks). Instead of debts of R$ 5.3 billion, a debt of R$ 43 billion, which took Americanas to fourth place in the ranking of the largest judicial recoveries in Brazil.

“Faced with this whole scandal, which suggests a major accounting fraud, one has to ask where the guardians of the capital market were”, says corporate governance specialist Alexandre di Miceli, a partner at Virtuous, a senior management consultancy.

He refers to the Americanas audit, responsible for examining balance sheet data; risk rating agencies, which analyze the risk that investors run when investing in company assets; and the analysis houses, which recommend or not the purchase of a stock based on the numbers and the company’s activity.

“They should have sent warning signals to investors and minorities about the risks that the company represented”, says di Miceli, doctor and master in business administration and finance from FEA-USP, with a postdoctoral degree from Université Catholique de Louvain ( Belgium).

Until January 11, when the BRL 20 billion shortfall in Americanas’ balance sheet was announced, 10 of the 15 analysis houses that accompanied the paper pointed to a target price above BRL 12, practiced at the close of the date. Some indicated an upside potential of 200% or more. Today, all 15 houses have placed the paper under review.

Conflicts of interest prevent unbiased analysis, experts say

In di Miceli’s opinion, there is no doubt that the main responsibility for the case lies with Americanas itself, which had an apparently active governance structure capable of classifying it in Level 2 of the B3, where the companies with the highest index are listed. of transparency and control. “The company had five committees to advise the board of directors, apart from the audit committee itself, which are the directors’ eyes on the company’s accounts”, says di Miceli.

Jonathan Mazon, a partner at Junqueira Ie Advogados, agrees. “Making this caveat that the first and greatest responsibility for the company’s numbers lies with the company itself, it is indeed necessary to draw attention to the other market players who should have sent smoke signals to investors and minorities about the risks of the business”, says Mazon, specialist in capital markets and corporate governance.

According to him, what exists most of the time is a conflict of interest that inhibits the issuance of alerts. “The main one is the audit”, he says. “This is a company contracted by the company under one expectation: that it indicates that everything is fine with the balance sheet and does not even think about making any reservations, which could worry investors and minorities”, says the expert.

Mazon worked at the defunct Andersen Consulting, which was one of the “Big Five” – the five largest consultancies in the world, which include PwC, KPMG, Deloitte Touche Tohmatsu and Ernst & Young. “Andersen went bankrupt precisely because of the Enron scandal,” she says.

In 2001, it was discovered that Enron, then one of the largest energy companies in the United States, manipulated information on profitability and profitability to hide its debts. At the time, credit rating agencies, investment banks and the SEC itself (the US Securities and Exchange Commission) were accused of negligence. Andersen was accused of destroying documents and barred from auditing.

“There was a clear conflict of interest: while Andersen received ‘X’ for the audit, the company’s tax consulting division received ‘500X'”, he says. “If the auditor placed a caveat on the balance sheet, the tax consultancy would certainly lose its contract with the company”, says Mazon.

The Enron scandal gave rise to the Sarbanes-Oxley Act in the United States, which prevented a company from offering auditing and consulting services to the same client at the same time.

The Americanas audit has been carried out, since 2019, by PwC, one of the giants in the sector. Before her, it was KPMG, which stayed between 2016 and 2018. In the previous period, between 2011 and 2015, it was PwC. According to a report by Valor Econômico, KPMG identified, in 2018, the need for “improvements in the internal controls” of the retailer’s operation, as a result of commercial agreements between the company and its suppliers.

“The audit team is not randomly chosen to monitor a company”, says di Miceli. “People who know the particularities of that business are selected, in this case, retail”, she says. “They are not detectives to investigate something that was certainly done with the consent of the board. But an amount of this nature is unacceptable.”

questioned by Sheet, PwC declined to be interviewed. Through its press office, it informed that “for reasons of confidentiality and rules of professional secrecy, PwC does not comment on client issues”.

Of the rating agencies, only Moody’s indicated high credit risk

With regard to risk rating agencies, says Mazon, they are also hired by the company to tell the market how risky it is to invest or not in its assets. “The most common thing is for agencies to rate debt securities, such as debentures,” she says. “There is a clear conflict on this point as well: if the agency does not give the rating that the company is looking for, the company can look for a competitor.”

In the case of Americanas, credit risk rating agencies already saw some deterioration in the financial situation at the end of 2022. The retailer’s credit rating was reviewed at the end of 2022 by Fitch and Moody’s. In both cases, the movements were justified by the increase in the company’s leverage. In September, S&P revised Americanas’ credit outlook to negative, but the company only revised after the outbreak of the crisis.

The agencies saw a reduction in the company’s cash caused by acquisitions made in recent years and an increase in debt and interest expenses.

In none of Moody’s and Fitch’s downgrade reports, however, was the risk of insolvency or problems in accounting for debt mentioned.

Moody’s says, through its press office, that its rating at the end of the year already indicated “a high degree of credit risk”, but admits that the analysis did not capture the impacts of the situation revealed later. “It is important to note that the ratings are opinions regarding the credit risk and are based, to a large extent, on the audited numbers provided by the companies. In this way, they do not have the function of auditing or even detecting ‘accounting inconsistencies'”, says the company.

Fitch and S&P did not return an interview request as of this writing. After the announcement of the accounting scandal, the three agencies promoted downgrades in the company’s grade, which reached the level of default (delinquency).

Credit Suisse saw 200% upside potential in the retailer’s stock

Analysis houses, on the other hand, offer one of the main points of conflict, says Mazon. “Most of the time, the coverage of the company’s papers is done by banks, with whom the company has other operations – issuing debentures, mergers and acquisitions, IPOs [oferta pública inicial]for example”, says the expert, highlighting that the bank is not paid to cover the paper.

“But he is paid for these other operations”, he says. “And what incentive does the analyst have to criticize a company with which his bank does business?”, asks the specialist, who also recalls that there are few banks in Brazil that operate in the capital market.

In Mazon’s opinion, Americanas’ governance proved to be a marketing piece, while the control of the “market guardians” was often reduced to filling out a checklist of good practices.

A Sheet got in touch with 10 analysis houses and banks that monitor Americanas shares to find out what led them to believe, until January 11, in the appreciation of the share. None responded to the report.

Only BTG sent the November 10 report, which analyzed the company’s results in the third quarter and recommended the purchase of the stock, with a target price of R$29, an appreciation of 142% – the same assessment made by Genial Investimentos. Even more excited about the stock’s potential were Eleven Financial (up 208%) and Credit Suisse (200%).

Collaborated with Renato Carvalho, from São Paulo

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