Here’s what might be going on with Cimic on Monday.
The post Cimic (ASX:CIM) share price dumps 15% before being halted. Here’s why appeared first on The Motley Fool Australia. –
The Cimic Group Ltd (ASX: CIM) share price tumbled today amid reports the company underpaid workers by millions of dollars and a broker downgrade of its stock.
The construction, mining, and services company froze the trading of its stock shortly after midday on Monday.
At the time of writing, the Cimic share price is halted at $15.51. That’s 15.38% lower than it was at its previous close.
For context, the S&P/ASX 200 Index (ASX: XJO) is down 0.32% right now.
Let’s take a look at what might be weighing on the company’s stock today.
Cimic share price flops amid underpayment reports
The Cimic share price has slumped amid reports from the Australian Financial Review (AFR) claiming the company could be facing the beginnings of a wage scandal.
According to the publication, the claims stem from the company’s decision to sell its 45% holding in Middle East-based BIC Contracting (BICC). It was sold to SALD Investment.
However, Cimic is now facing backlash from former BICC employees. They’re claiming Cimic failed to pay their wages, entitlements, or compensations after making them redundant earlier this year.
Others reportedly claim BICC cancelled their health insurance, placing them in a precarious position during the pandemic.
Former employees have recently approached Cimic’s CEO Juan Santamaria on LinkedIn.
Santamaria has personally responded to some messages from former employees, stating BICC’s acquirer was meant to provide the contended wages.
It’s a story that’s been brewing for a number of weeks now, with The Australian reporting on the LinkedIn messages in late November.
According to today’s reports by the AFR, more have now signed letters to the Australian Securities and Investments Commission, the Fair Work Ombudsman, and the Australian Ambassador to the United Arab Emirates (UAE).
The AFR quoted a letter to the Australian Ambassador to the UAE as saying:
We find ourselves at the centre of a deep David and Goliath crisis involving high level corporate misconduct.
The matter involves some complexity due to a Sale and Purchase Agreement (SPA) with a local company named SALD, wherein CIMIC has endeavoured to assign all management control to SALD upon announcement of the proposed sale even though the company trade licenses remain in CIMIC’s holding company’s name and the sale itself is not completed, due to many of the conditions stipulated in the SPA not having being fulfilled to date.
On top of that, the AFR reports some former employees have filed legal cases in the United Arab Emirates.
Cimic is said to have responded to AFR‘s request for comment, saying:
BICC has never been and is not currently controlled by CIMIC… We are always concerned as to the fair treatment of individuals and we have requested, through BICC management, that they investigate the claims and meet their commitments to their employees where applicable. This is a matter for the acquirer.
The Cimic share price might also be feeling the impact of a downgrade from Credit Suisse.
According to reporting by the Sydney Morning Herald, Credit Suisse analyst William Park dropped the company’s target price to $17.16 and slapped it with a ‘neutral’ rating.
That’s a 21% drop on the broker’s previous target for the Cimic share price.
Whether the AFR‘s reporting or the broker’s downgrade directly resulted in Cimic’s tumble is unknown.
Cimic has told the market it paused the trading of its shares while it gets ready to make an announcement.
Right now, the Cimic share price is 39% lower than it was at the start of 2021. Its value has also fallen 16% over the last 30 days.
The post Cimic (ASX:CIM) share price dumps 15% before being halted. Here’s why appeared first on The Motley Fool Australia.
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