Samsonite International SA, the world’s biggest luggage maker, found itself attacked by a short seller a few weeks ago. This is not a place publicly traded companies want to be, and responding skillfully presents challenges. Samsonite’s reply has been fairly tepid. We waited for something stronger — but in vain. Let’s look.

On May 24, Texas-based Blue Orca Capital put out a 48-page report against Samsonite, claiming improprieties with its accounting, related-party transactions with entities owned by the CEO’s family, and other alleged infractions. Another accusation — easier to grasp — was that the CEO, Ramesh Tainwala, did not possess a doctorate degree as was claimed in regulatory filings and elsewhere.

Samsonite’s shares plunged and trading was halted — twice. (Though the company was founded more than 100 years ago in Denver, it is now headquartered in Mansfield, Massachusetts; incorporated in Luxembourg; and traded in Hong Kong.)

Samsonite, which, in addition to its namesake, owns luxury brands Tumi and Hartmann, acknowledged the report. It said the allegations were “one-sided and misleading,” and the conclusions “incorrect.” The company weakly declared it would “provide additional information in due course, as appropriate.”

The press release acknowledging the Blue Orca report quoted Samsonite Chairman Timothy Parker: “I would like to ask our investors for their patience during this time, and to thank them for their support. I have full confidence in Ramesh’s capabilities as CEO, and in the broader management team.”

That too was pretty weak tea, especially the bit about asking investors for their patience. What they wanted were answers. They didn’t get any — for a week.

Two Releases

On June 1, the company put out two press releases. The first announced that, low and behold, it had appointed a new CEO (CFO Kyle Gendreau) and that Tainwala had resigned. Given the particular charge against Tainwala, a week seems a long time to take that action. As is done in these situations, the press release focused more on the new guy than on the outgoing embarrassment.

The statement did, however, include a strange (read: lawyered up) quote from Parker about the bona-fides allegation against Tainwala:

“While the board notes that since the company’s IPO in 2011, its disclosure of Ramesh’s educational background has been accurate, the board also takes seriously the allegation that has been made about his academic credentials. Ramesh tendered his resignation, citing personal reasons. In considering such resignation, the board thoroughly reviewed the facts related to this allegation and has determined that accepting Ramesh’s resignation is in the best interests of the company and its shareholders.”

We guess, reading through the lines (since the company was hardly transparent), we can conclude that accusation was true. Mr. Market lauded the leadership change. Reuters: “Samsonite CEO Makes Hasty Exit After Short-Seller Attack, Shares Surge.”

The second release confronted the Blue Orca report head-on. The company said its board “thoroughly reviewed” the allegations and found them to be “one-sided and misleading” and the conclusions “incorrect” — exactly the language it used a week earlier. It summarized the review, in which it defended its accounting practices, including for the 2016 purchase of Tumi and for writing down its inventory, and also defended its “continuing connected transactions.”

Smartly, Samsonite noted that it posted its full report on its investor-relations site, but it wasn’t easy to find.

Interestingly, neither the press release nor the full report mention the doctorate dilemma.

Photo Credit: TY Lim/Shutterstock

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