NEW YORK -- Questions about internal accounting imbalances at two Interpublic Group units in Europe prompted the agency holding company to postpone its second-quarter earnings report last week, sending its stock on a two-day slide, sources said.
IPG's share price fell 24 percent last Monday and a further 11 percent on Tuesday to close at $13.40 a share, a new 52-week low. But it rebounded somewhat on Wednesday after J.P. Morgan upgraded the stock from "long-term buy" to "buy," and it closed Friday afternoon at $17.15.
The units in question were in separate countries but within the same marketing services network, said sources. Combined, the imbalances are said to be around $50 million, a figure that is relatively small for a company that claims worldwide revenue of about $6.7 billion.
Still, in a period of heightened anxiety about financial reporting, IPG CEO John Dooner and CFO Sean Orr took extra time to investigate the discrepancies. Since the probe required accountants to fly to Europe, IPG chose to push its report back a full week.
Last Monday afternoon, the company said that its board's audit committee needed more time to "complete its review prior to management certification of its financial statements." No explanation was given for the delay.
Some industry analysts were frustrated by the lack of information but nonetheless took a wait-and-see attitude.
"We are reluctant, in the current climate, to get in front of management's explanation," said Merrill Lynch's Lauren Rich Fine.
Still, Salomon Smith Barney last Tuesday downgraded its rating of IPG's stock from "buy" to "neutral," and Standard & Poor's put IPG on "CreditWatch," which could result in a downgrading of the company's credit rating for short and long-term borrowing. That day, trading volume on the stock skyrocketed to more than 20 million shares -- more than twice Monday's volume of 9 million and roughly 10 times the average.
The volume was high again on Wednesday -- with more than 11 million shares traded -- but this time investors were buying, sensing a good deal in part because of J.P. Morgan's upgrade. The stock closed higher that day, at $16.15, and by Friday it was up another $1.
As of late last week, the rescheduled earnings report was still slated for tomorrow, at the close of the stock market, with an analysts' call at 5 p.m. The five-member audit committee is expected to look at the numbers today.