Materials company Energy Conversion Devices
The simple answer to this question is, "Yes." Auditors fight for new accounts. Why would Deloitte give up an account that they have had for 35 years? They probably want to avoid a lawsuits if the Energy Conversion Devices fails.
Last week Deloitte settled a lawsuit involving bankrupt United Companies. Although the settlement is sealed, the lawsuit questioned if the auditors had properly advised United's management about financial problems. With Energy's troubles, Deloitte probably saw their longstanding relationship as a potential liability not worth the risk.
Energy Conversion Devices faces a cash crunch -- although the need for financing is not immediate as the company's total debt is modest at $22 million. Besides equity financing -- which would dilute shareholder ownership -- the company is trying to form joint ventures for its solar, fuel cell, and cognitive computer business units. The company is also looking at adding more debt.
Energy has many promising products. From optical and electronic memory to thin-film solar cells, the company could surprise shareholders with product news. But that has been the case for many years. Now, more than ever, Energy needs a successful product.
In September, Energy filed for a 15-day extension to its annual report. Deloitte needed time to complete an analysis of Energy's repurchase of their solar business for the joint venture's partner. When the annual report was released, it included an "on-going concern" warning paragraph in the auditors section.
Reading Energy's press release, the Deloitte news seems like a non-event. But for those who believe there is fire where there is smoke, the news is a warning sign that caution is in order.
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W.D. Crotty does own stock in Energy Conversion Devices. You can e-mail W.D. at [email protected] .
