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Market Crushing Celadon Group, Inc. (NYSE:CGI) on Alleged Financial Improprieties

Celadon Group, Inc. (NYSE:CGI)

Celadon Group, Inc. (NYSE:CGI) shares are plummeting after the company released a statement claiming that the company’s auditor, BKD LLP, withdrew its support on previously issued quarterly and year-end financial statements. CGI shares closed yesterday at $4.00 and gapped down to open today’s trading at $2.20 which also represents the stock’s highest trading level. Shares have dropped to as low as $1.30 as of 12:08 PM EST and are trading over 80% down from their 200-day simple moving average. Volumes have been large. The small-cap trucking company has a 30-day average daily volume of 627,000 but by noon over 10 million shares had traded.

The carnage visited upon shares of Celadon Group, Inc. (NYSE:CGI) reportedly began on April 5, 2017 when Prescience Point Research published allegations that Celadon had used off-balance sheet entities and manipulative accounting methods to hide its insolvency and shield it from possible adverse actions by creditors.

Short sellers are jumping on Celadon Group, Inc. (NYSE:CGI). The percent of the share float represented by short traders is, as of this writing, at 29%. Just 40 days ago CGI shares had been trading over $9.00 and had a 52-week high of $11.91. The Relative Strength Index (RSI) figure is 12.37. Traders use the RSI to gauge over sold/bought conditions. A figure below 20 is often thought of as over-sold. However, the errors in the financial releases may make many investors hesitant to take a chance.

Sales for Celadon Group, Inc. (NYSE:CGI) had been steadily increasing. In 2012, the company posted sales of $600 million. By 2016 that number had reached $1.07 Billion. In February Stifel analysts had upgraded the shares from a “sell” to a “Hold” and increased their target price from $5.50 to $10.

Securities law firms are out in force trying to sign up investors who owned shares of Celadon Group, Inc. (NYSE:CGI) during the period of the alleged financial misdeeds. It is alleged that Celadon violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (i) Celadon’s equity contribution to its joint venture with Element Financial Corp. was $68.2 million, not the $100 million that Celadon reported in public filings; (ii) Celadon was being investigated by the Securities and Exchange Commission; and (iii) as a result, Celadon’s financial statements were materially false and misleading.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading.