Shares of Chemours(NYSE: CC) rallied 16.8% today after the chemical company concluded an internal review that's loomed over the business for the past week, finding that that three top executives violated its code of ethics.
Recall Chemours stock plummeted nearly 40% in a single day last Thursday after the company reported preliminary 2023 results and placed its CEO, CFO, and company controller on administrative leave pending the review. The review originally stemmed from an anonymous report made to Chemours' ethics hotline.
Chemours completes its internal review
In a press release this morning, Chemours said it determined that "there was a lack of transparency" with its board of directors by the three aforementioned executives as it related to the timing of payables and receivables and their effect on certain free-cash-flow targets.
In particular, the review revealed that the executives moved to delay payments to certain vendors that were originally due to be paid in the fourth quarter of 2023 until the first quarter of 2024. They also accelerated collection of receivables in Q4 2023 that were originally not due to be received until Q1 2024. The executives did so in order to meet previously communicated free-cash-flow targets that would be part of a key metric for determining their incentive compensation. The audit also found that similar actions were taken in the fourth quarter of 2023, but to a lesser extent than in Q4 2023.
What's next for Chemours investors?
The company continues to work on assessing the impact on cash-flow measures stemming from the executives' actions. Of note, however -- and this is likely the reason the stock is rebounding today -- the findings of the review don't affect Chemours' preliminary earnings results for the year ended 2023 announced last week.
Chemours pledged another update as soon as it's able to conclude its audit, noting it's also evaluating potential additional material weaknesses in its internal control over financial reporting. But this effectively removes a significant amount of uncertainty that has hovered over the stock since last week's announcement. It's hardly surprising to see shares rebounding in response today.
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Steve Symington 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.
