Online job site Monster Worldwide Inc. and four other companies on Monday disclosed investigations by U.S. authorities into executive stock options grants, widening a scandal that now involves some 40 companies.
The growing investigation into the suspicious timing of stock options in a possible effort to boost their value has also prompted CalPERS, the largest U.S. pension fund, to request explanations from 25 companies.
Monster said on Monday it had been subpoenaed by the U.S. Attorney for the Southern District of New York and pledged to cooperate fully with the inquiry.
Earlier Monday, the company said a committee of independent directors would analyze its options practices following a Wall Street Journal report that questioned whether grants were backdated or timed ahead of sharp rallies in its stock price.
Shares in Monster, the largest U.S. recruiting Web site, dropped as much as 9 percent, prompting some analysts to raise their view of company risks.
While we continue to view near and long-term operating fundamentals favorably (for Monster), the overhang created by this investigation will likely keep a cap on shares, wrote Goldman Sachs analyst Peter Appert in a research note.
Appert downgraded the share to in-line from outperform. Robert W. Baird & Co. also lowered its rating on the share to neutral from outperform.
Microchip maker Broadcom Corp. and data center services company Equinix Inc. each said they had received informal requests for information from the U.S. Securities and Exchange Commission over their options grants.
Medical device maker Cyberonics Inc. said it had been contacted by the SEC, despite a company denial last week of possible improprieties raised by a securities analyst.
Applied Micro Circuits Corp. said it was also subject to an informal inquiry by the SEC, while Comverse Technology Inc. and its former subsidiary Ulticom Inc. delayed filing first-quarter results due to their ongoing investigations.
NEW SECTORS JOIN MOSTLY TECH-RELATED PROBES
Technology companies, which have relied heavily on options packages to boost executive and employee salaries, have been the most vulnerable to such probes to date.
Large companies from other sectors under internal or outside investigation include insurer UnitedHealth Group Inc. and education provider Apollo Group Inc.
Federal prosecutors and securities regulators are weighing the type of legal action that could be taken over options packages that appear to have been dated retroactively to take advantage of a low share price or timed ahead of good news.
The probes have prompted share declines and in some cases, executive dismissals or shareholder lawsuits.
In a further sign of potential fallout, the California Public Employees' Retirement System (CalPERS), a pension fund with more than $200 billion in assets, said on Friday it had asked explanations from 25 companies identified in the media for questionable options practices.
These allegations raise concerns about a lack of oversight by the Board of Directors, weak internal controls, weak internal and external audit practices, and poor accounting -- as well as the possibility of civil and criminal penalties against these companies, said Christianna Wood, CalPERS Senior Investment Officer for Global Equity, in a statement.
CalPERS sent letters asking companies already in the process of reviewing their options grants, such as Affiliated Computer Services and Comverse, to disclose publicly their findings and any new policies they may set regarding option grant dates.
Monster shares dropped $3.09 to $38.91 after trading as low as $38.30 early in the session. Comverse slid more than 12 percent to $20.64 to a new year low, Equinix fell 5 percent to $53.44 and Cyberonics lost more than 3 percent to $21.91.
Bucking the trend, Applied Micro was nearly unchanged while Broadcom rose nearly 2 percent to $29.80.