Renault Stock Price Hammered As CEO Ghosn Arrested In Japan.
“While we acknowledge that Mr Ghosn is a key figure in the Alliance, we are confident that it can – at a minimum – continue in its current structure and continue to generate cost-efficiencies, even if Ghosn is ousted”
Renault of France’s stock price fell almost 10% after news CEO Carlos Ghosn was arrested in Japan over suspected financial violations.
Ghosn is also chairman of Nissan Motor of Japan, and heads up the Nissan Renault alliance, which also now includes Mitsubishi Motors.
Investors worried that the long hoped for full merger between Nissan and Renault might not happen.
In later trading on Monday, Renault shares recovered a bit to 58.72 euros, a 9% fall.
Nissan said it will seek Ghosn’s removal over allegations he used company money for personal use, after an investigation.
“The investigation showed that over many years both Ghosn and (Greg) Kelly have been reporting compensation amounts in the Tokyo Stock Exchange securities report that were less than the actual amount, in order to reduce the disclosed amount of Carlos Ghosn’s compensation,” Nissan said in a statement.
“Also, in regards to Ghosn, numerous other significant acts of misconduct have been uncovered, such as personal use of company assets, and Kelly’s deep involvement has also been confirmed,” the company said.
Neither Ghosn or Kelly commented on the charges.
According to Citi Research, Ghosn is viewed as the chief architect of the long-term revival of once ailing Nissan and the alliance with Renault, but it would survive without him.
“While we acknowledge that Mr Ghosn is a key figure in the Alliance, we are confident that it can – at a minimum – continue in its current structure and continue to generate cost-efficiencies, even if Ghosn is ousted,” Citi Research analyst Raghav Gupta-Chaudhary said.
Bernstein Research analyst Max Warburton said the allegations included “other significant acts of misconduct” which might imply other accounting irregularities.
“But the headlines seem to suggest personal misconduct by Ghosn – rather than accounting issues at Nissan itself. We do not immediately leap to the conclusion that this means Nissan has deep financial problems,” Warburton said.
Warburton said this probably means the end of Ghosn’s reign at Renault, but he had already stated his intention to leave by 2022.
Renault bought a 44% stake in Nissan in 1999. Investors had for some time been pressing Ghosn to engineer a full merger with Nissan, which was seen as a big benefit to Renault shareholders.
“It is hard not to conclude that there may be a gulf opening up between Renault and Nissan,” Warburton in a report headed “Renault:Carlos Ghosn – is this the “Re-Japanization” of Nissan and the end of the Alliance?”
“We do not believe an unravelling of the Alliance would be a total disaster for Renault shareholders – one could argue that selling the Nissan stake could actually realise more value than sitting with the current structure. The stock reaction may prove overdone,” Warburton said.