German ERP vendor SAP AG, faces the second investigation in four years into allegations that staff sold shares immediately before the company issued a profit warning. The new probe centers on dealings that took place before SAP’s shares lost about a fifth of their value when it released a statement on January 5 warning that results would be below expectations due to a decline in the Japanese market.
The inquiry will be a considerable embarrassment to SAP as the company was previously investigated by federal authorities over a large number of share sales that preceded a profit warning issued in October 1996 that led to a 23% fall in the share price. Although around 100 employees were questioned, no prosecutions have taken place. Three unnamed employees agreed to make charitable donations as a result of transactions, though they admitted no guilt, and the cases against two other individuals remain open. With a federal holiday in Germany yesterday, there was no response from SAP or the prosecutors office in Heidelberg to reports which originally surfaced in the Wall Street Journal.
Since the company has such a large number of employee shareholders, it is inevitable that some share sales take place at a time that invites suspicion, and it is possible that inside knowledge may not have been a catalyst. However, over the past year, SAP shares have almost halved from $60.10 to $32.30 so the German authorities will rigorously investigate allegations that SAP employees may have profited from a share slide that has hit the company’s investors hard.
