Internal strife has landed at Archer Daniels Midland (ADM), as the agribusiness titan finds a shareholder trying to oust the company’s CEO. The main reason stems from issues of internal accounting that proved to be rougher on share prices than many may have expected. But investors found little cause for alarm, instead sending shares up fractionally in Tuesday afternoon’s trading.
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Word from Reuters described a LinkedIn post from the shareholder, Hartwig Fuchs, who had little good to say about his investment. Hartwig’s post was titled “Investor-misery has a name:ADM,” and Fuchs detailed a lack of transparency about some key accounting practices. That might sound a lot like nitpicking, until you consider that ADM’s accounting practices have actually started a criminal investigation.
And Fuchs is in a good place to know. Fuchs is the former board chairman of Alfred C. Toepfer International, a trading firm in Germany. Fuchs declared, in the words of a German proverb, “…the fish always stinks from the head.” Thus, Fuchs parked most of the blame on ADM CEO Juan Luciano, and called for his ouster.
It’s Not Just the Accounting
While ADM’s accounting methods have done it some damage—years of financial reporting at ADM needed to be amended following incorrect sales records—that is not the only problem for ADM. A report from CU-CitizenAccess detailed that, in the last 10 years, ADM has been fined close to $52 million for violations of various state and federal laws.
That is an average of just over $5 million annually lost to a series of errors that likely could have been prevented ahead of time. And, since Luciano became CEO of ADM in January 2015, all of this essentially happened on his watch. The accounting kerfuffle would be bad enough on its own, but add in fines that measure over $50 million during your tenure and it becomes little wonder some want this CEO tossed.
Is Archer Daniels Midland a Good Stock to Buy?
Turning to Wall Street, analysts have a Hold consensus rating on ADM stock based on five Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 28.38% loss in its share price over the past year, the average ADM price target of $54.33 per share implies 8.16% upside potential.
