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Why Pilgrim's Pride Got Plucked Today

By Jeremy Bowman – Jun 3, 2020 at 4:45PM

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The poultry processor's CEO was indicted for price-fixing.

What happened

Shares of poultry processor Pilgrim's Pride (PPC -2.34%) were getting taken to the woodshed today after the company's CEO was indicted for price-fixing, following a years-long investigation.

As a result, the stock closed down 12.4%.

A man walking through a chicken facility

Image source: Getty Images.

So what

Jayson Penn, the CEO of the No. 2 poultry processor behind Tyson Foods, was charged in Colorado along with Roger Austin, a former vice president of the company, and face a penalty of up to 10 years in prison and a $1 million fine.  Authorities have also issued subpoenas to Tyson and Sanderson Farms, whose shares also fell on the news.

The price-fixing ring for broiler chickens was alleged to have to taken place from 2012 to 2017.

It's unclear what the consequences will be for Pilgrim's Pride, though the company will probably have to name a new CEO and could be subject to fines as well as increased oversight over antitrust issues. There are also civil lawsuits pending from supermarket chains like Walmart and Kroger and food suppliers including U.S. Foods and Sysco, which could lead to sizable penalties.

Now what

Pilgrim's Pride has not issued the statement on the matter, and the indictment is likely to be an eyesore for both Pilgrim's Pride and the industry. Executives from Claxton Farms were also charged.

The meat industry  has already been facing challenges related to COVID-19's impact on meatpackers and the loss of restaurant customers. The price-fixing scandal is likely to be a cloud over Pilgrim's Pride and the industry until it's resolved.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Pilgrims Pride Stock Quote
Pilgrims Pride
PPC
$22.15 (-2.34%) $0.53
Walmart Stock Quote
Walmart
WMT
$131.68 (-0.93%) $-1.24
Kroger Stock Quote
Kroger
KR
$43.72 (-1.97%) $0.88
Tyson Foods Stock Quote
Tyson Foods
TSN
$65.52 (-1.68%) $-1.12
Sysco Corporation Stock Quote
Sysco Corporation
SYY
$73.27 (-2.32%) $-1.74
Sanderson Farms Stock Quote
Sanderson Farms
SAFM
US Foods Holding Stock Quote
US Foods Holding
USFD
$27.60 (-1.99%) $0.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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