DEUTSCHE BANK: 5 Reasons This Walmart Scandal Is A Big Freaking Deal

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Photo: Flickr / Walmart Stores

Walmart shares are are diving more than four per cent after The New York Times reported on massive bribery allegations in Mexico.Already analysts out of Citi have said that The Times report would have a muted impact on the stock, and ended up raising their price target on the country’s largest retailer.

But Deutsche Bank sharply rebuts Citi’s take and offers five key reasons why this will have a serious impact on Walmart.

“Unlike prior bad PR stories in recent years, this will be a material distraction for Wal-Mart on multiple fronts,” Charles Grom of Deutsche Bank says. 

From the note.

  1. [Foreign Corrupt Practices Act] cases are both extensive and expensive, including penalties for individuals/entities for both anti-bribery and accounting provisions.
  2. The story will be a huge distraction for the company for quite some time and could potentially include jail time for both current/former employees.
  3. It is plausible some members of senior management will be asked to step down from their current positions.
  4. The question: “have these bribery practices been used in other countries?” will certainly be raised and likely investigated
  5. If proven true, the allegations would put a broadside in the growth engine of the company

Deutsche Bank also calls up an incident at Siemens in 2008. The tech company’s Argentinean unit plead guilty to FCPA violations and had to pay fines that totaled $1.6 billion.

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