Shocking financial scandal! The stock price of ADM, the leader of the "Four Major Grain Traders," has plummeted, and some short sellers have already made ten times their investment!

The leader of the "Four Major Grain Traders," ADM, has received "bad news" as the company is undergoing an accounting investigation and has had its rating downgraded by multiple securities firms. Meanwhile, the short sellers who had positioned themselves in advance are reaping huge profits.

On January 22nd, the stock price of agricultural giant ADM plummeted over 24% in a single day, closing at $51.69, marking the largest intraday decline since its US IPO on July 28th, 1980, and hitting a new low since February 2021.

In the two weeks prior, traders had purchased put options expiring in February and March, selling over 1.6 million shares of ADM stock at a price of $65 per share. Based on the average trading price on January 5th and Monday, the profits for the holders of these options could reach as high as $17.7 million.

ADM stock price

According to media reports, ADM is currently undergoing an accounting investigation, with CFO Vikram Luthar temporarily suspended and Ismael Roig serving as interim CFO (Ismael Roig was previously the President and Managing Director of ADM Asia Pacific).

As a result, the company has lowered its earnings forecast for 2023, delayed the release of its quarterly and 10-K reports, and revised its adjusted EPS forecast from "over $7" to $6.90.

There are concerns in the market regarding ADM's financial management and transparency.

Following the filing request from the US Securities and Exchange Commission (SEC), at least four securities firms have downgraded ADM's stock rating.

Previously, the SEC had made a voluntary filing request to ADM, asking for specific financial information or documents for review to ensure compliance with relevant financial reporting and regulatory requirements.

In order to cooperate with the SEC's work, ADM subsequently launched an investigation. This investigation focuses on the accounting operations and processes of its Nutrition division (which involves human and animal food), conducting an internal review of its nutrition division.

ADM is a global food processing and commodities trading company, with its business segments primarily including Agricultural Services and Oilseeds, Corn Processing, Flavor and Nutrition, and Other Businesses.

Over the years, the company's performance has reached new highs, earning substantial profits, thanks to the high gross margins of its crop processing, strong demand for animal feed and biofuels.

However, compared to the strong performance of the company's other business segments, the recent performance of its Nutrition division has been less than ideal. The division has been under pressure due to weak demand for meat substitutes and other products, as well as the shutdown of a major soybean processing facility.

ADM's Nutrition division was once a profit-generating powerhouse for the company, representing a high-profit segment. ADM has been trying to expand its Flavor and Nutrition business, including the acquisitions of WILD Flavors and FDL in the UK. However, analysts believe that ADM has recently invested a large amount of money in animal feed and pet nutrition but has not achieved the expected results.

Goldman Sachs analyst Adam Samuelson believes that the most important thing is to figure out how serious the potential accounting issues in ADM's nutrition department are and the impact these issues may have on the department's revenue and profit margins.