Russia-Ukraine conflict causes going concern issues at VEON as two board members resign
VEON, LYFT, STNE, POSH, FB, PM, GS
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Filings from the week of April 27 - May 3.
Lyft Inc. (LYFT) identified an accounting error totaling $52.8M. Veon Ltd (VEON) reported substantial doubt on continuing as a going concern due to the Russia-Ukraine conflict. Russian billionaire oligarch Mikhail Fridman resigned from VEON’s board as he faced EU sanctions. Philip Morris (PM) and Goldman Sachs (GS) announced the scaling down of their Russian operations.
Read the full post on our blog here.
Top Red Flags
LYFT INC (LYFT) | 8-K | $7B - An accounting error was identified related to LYFT’s reinsurance costs. LYFT had understated its net loss by $52.8M for the year ended December 31, 2021. The audit committee concluded that both LYFT’s annual report and consolidated financial statements for the year ending December 31, 2021 should no longer be relied upon.
STONECO LTD (STNE) | 20-F | $2.8B - Three of STNE’s board members resigned on the same day (March 24, 2022) Meanwhile, the company did not evaluate the controls for five of its subsidiaries, which represent over 47% of the company’s net assets.
POSHMARK INC (POSH) | 8-K | $959M - Tennis legend Serena Williams resigns from Poshmark’s board of directors. The company reported ineffective controls in its most recent annual report.
Russia-Ukraine Updates from SEC Filings
META PLATFORMS INC (FB) | 10-Q | $563B - FB reported that due to the war in Ukraine, the Russian government had restricted access to Facebook and Instagram from its citizens, driving down user growth and engagement in Q1 2022. FB expects these restrictions will continue to negatively impact FB’s advertising revenue and business in the region.
PHILIP MORRIS INTERNATIONAL INC (PM) | 10-Q | $154B - PM suspended its planned investments in Russia and has initiated plans to scale down operations in the country. PM’s Russian operations total approximately $1.4 billion in total assets. It has not yet recorded impairment in its Russian long-lived assets but has written off approximately $15 million in Russian inventory.
GOLDMAN SACHS GROUP INC (GS) | 10-Q | $108B - GS reported that it is in the process of winding down its operations in Russia. The company suffered a net loss of approximately $300 million in Q1 2022 due to the Russian-Ukrainian conflict.
KBR INC (KBR) | 10-Q | $6.6B - KBR announced its intent to exit commercial projects in Russia, reducing its backlog by $56 million.
VEON LTD (VEON)
20-F | Market Cap: $1B
Veon Ltd (VEON), a multinational telecommunications services company, reported that it has substantial doubt about its ability to continue as a going concern. [1]
VEON’s going concern issue was primarily caused by the ongoing conflict between Russia and Ukraine. [1] VEON owns Ukraine’s largest telecom operator, KyivStar, and one third of its total subscribers are in Ukraine and Russia. VEON stated that a significant portion of its customer base could be permanently lost. [2]
VEON’s troubles were further exacerbated by multiple board resignations.
Mikhail Fridman, a billionaire Russian oligarch, stepped down from VEON’s board of directors on February 28, 2022. His resignation was primarily caused by the European Union’s sanctions against him. [3]
Additionally, Robert Jan van de Kraats resigned from VEON’s board of directors on March 7, 2022. Mr. Kraats was the head of the Audit and Risk Committee. His resignation was due to personal reasons.
“The Company has been negatively impacted and will continue to be negatively impacted by the consequences of the Russian government’s invasion of Ukraine (the ongoing conflict between Russia and Ukraine), which raise substantial doubt about its ability to continue as a going concern.”
“As of April 29, 2022, hostilities continue in Ukraine. One third of our total subscribers are in Ukraine and Russia, where they are supported by 32,000 employees. VEON’s priority is to protect the safety and well-being of our employees and their families. We have developed and, in some cases, implemented additional contingency plans to relocate work and/or personnel to other geographies and add new locations, as appropriate. As of April 29, 2022, most of our Ukraine subsidiary’s employees remain in the country. As of April 15, 2022, millions of people have fled Ukraine and the country has sustained significant damage to infrastructure and assets. If the ongoing conflict persists, we could lose a percentage of our customer base in Ukraine.”
“On February 28, 2022, the European Union imposed sanctions on Mikhail Fridman and Petr Aven, and on March 15, 2022, the United Kingdom imposed sanctions on then LetterOne shareholders, Mr. Fridman, Mr. Aven, Alexey Kuzmichev and German Khan, and the European Union additionally designated Mr. Khan and Mr. Kuzmichev (collectively, and with Mr. Aven and Mr. Fridman, the “Designated Persons”). Mr. Fridman resigned from VEON’s board of directors effective February 28, 2022.”
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