MW This $22 billion robotics company's stock is tumbling as accounting errors found

By Tomi Kilgore

Symbotic said investors should no longer rely on its Q4 results, which had sent the stock soaring 28%

Symbotic Inc. is another example of how damaging it can be for a company's stock if management doesn't keep a close eye on accounting practices.

The robotics company $(SYM.AU)$, which had a market capitalization of $21.9 billion as of Tuesday's close, uses its artificial intelligence-powered software platform to automate warehouses for retailers and food companies.

Symbotic currently has an automation agreement to implement its systems in all of Walmart Inc.'s $(WMT)$ 42 regional distribution centers.

On Wednesday, the company said it can't file its annual report on time, because it needs extra time to correct accounting errors, and how those errors affect internal controls over financial reporting.

"Management has identified in its preliminary assessment of internal control over financial reporting for the fiscal year ended Sept. 28, 2024 certain material weaknesses," Symbotic said in a statement. "The company is implementing measures designed to improve internal control over financial reporting to remediate these material weaknesses."

The stock plunged 32.1% toward a seven-week low in premarket trading, which puts it on track to suffer the biggest one-day selloff since the record 42.1% drop on June 9, 2022. That selloff would wipe about $7 billion off the company's market cap.

On Nov. 18, the company had reported fiscal fourth-quarter results that were well above expectations and provided an upbeat first-quarter outlook. The stock soared 27.7% that day, even after the company said it had to restate results for the year after it found improper accounting of certain expenses.

On Wednesday, Symbotic said it found additional accounting errors, this time related to the improper recognition of revenue. As a result, the company said its fiscal fourth-quarter results "should no longer be relied upon."

The company estimates that the errors will lower revenue and gross profit, and reduce full-year adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) - a measure of underlying profitability - by $30 million to $40 million.

The company also cut its fiscal first-quarter guidance for revenue to $480 million to $500 million from $495 million to $515 million, and for adjusted Ebitda to $12 million to $16 million from $27 million to $31 million.

And regarding its 10-K annual report, the company filed for an extension of the deadline, saying it needs more time to figure out the financial impacts of correcting the accounting errors.

Earlier this week, Macy's Inc.'s stock $(MIMI)$ took a hit after the department-store chain said it found that a single employee responsible for small-package delivery expenses, had hid up to $154 million in expenses over the past three years. That led the company to have to delay the release of fiscal third-quarter results.

And then there's Super Micro Computer Inc. $(SMCI)$, the former AI-darling that saw its stock plummet over $100, or 85% from its March peak to its November low, to cut $55.9 billion of the company's market cap.

The company's inability to meet the deadline for filing its annual report because of accounting issues, and as its auditor resigned, led to fears of the stock being delisted from the Nasdaq.

It appears that Symbotic's accounting issues won't go that far, however. The company said it expects to file its annual report, as well as amended quarterly reports, on or before the expiration of the 15-calendar day extension period.

Symbotic's stock had soared 74.8% over the past three months through Tuesday, while the S&P 500 index SPX had gained 7%.

-Tomi Kilgore

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November 27, 2024 09:12 ET (14:12 GMT)

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