What happened
View (VIEW 8.56%) stock got crushed today on the heels of news that the company had delayed its second-quarter earnings release. The company's share price fell 24.3% in the session, according to data from S&P Global Market Intelligence.
View announced that an audit committee commissioned by the company's board of directors had opened an investigation into "the adequacy of the company's previously disclosed warranty accrual." The company paired the news that it would be delaying its Q2 report with preliminary results for the period that looked strong on many fronts, but the shadow cast by the internal investigation prompted a steep sell-off for the stock.
Image source: Getty Images.
So what
The company expects to post $15.1 million in sales in Q2, good for growth of 127% year over year and 28% on a sequential basis. View plans to report its second-quarter results as soon as practicable after the audit committee has completed its investigation.
The following quote from the company's press release contains the core of the currently available information about View's audit committee and the internal review:
The audit committee has retained independent legal and accounting advisors to assist with the investigation. The investigation is ongoing, and the audit committee is working diligently with its counsel and advisors to complete the investigation as soon as possible. View cannot predict the duration of the investigation, eventual scope, its outcome, or its impact on the company's financial results or the company's assessment of its internal control over financial reporting for prior periods. As a result, the company has not finalized its financial statements or its assessment of the effectiveness of its disclosure controls and procedures and internal control over financial reporting for the three and six months ended June 30, 2021.
That's a pretty standard statement after an earnings filing has been delayed in order to conduct an internal investigation, but it doesn't leave investors with much insight into the conditions or potential severity of the matter at hand. With that kind of uncertainty on the table, it's not surprising that shareholders moved out of the stock.
Now what
Internal audits don't always produce damaging findings, and sometimes investors overreact to news of these kinds of investigations. On the other hand, View is a young, growth-dependent company that's still in the early stages of building its brand and business relationships. Its outlook is already speculative. The added threats and concerns raised by audits only make things more complicated.
If that weren't enough, View has a relatively short history as a publicly traded company. It was taken public in March through a merger with special purpose acquisition company (SPAC) CF Finance Acquisition Corp. II. Many companies taken public through SPAC mergers have seen bumpy trading following their debuts, and some investors and analysts have raised concerns about relatively limited levels of visibility into operations and accounting.
View reported having a cash position of roughly $451.4 million at the end of June, so it should have capital on hand to pursue ongoing growth initiatives. However, investors should proceed with the understanding that the stock could see volatile trading in the near term.