American Tower Corp. confirmed last week that it will restate financial results from 2005 through the first quarter of this year due to discrepancies in “measurement dates” of certain stock-option grants.
American Tower said an internal committee is still reviewing the stock-options backdating matter and plans to submit restatement forms to the Securities and Exchange Commission once the investigation is done. The company’s third-quarter results are scheduled to be released Nov. 8, and American Tower said it will provide an update on the issue during an earnings conference call then.
Interestingly, despite all the corporate shenanigans that have taken place over the past several years, American’s Tower’s backdating debacle hasn’t seemed to have scared off investors.
Though American Tower’s stock price plunged as news of the scandal reached investors, the decline proved to be only temporary. The company’s stock has rebounded and was trading last week at a healthy $36.98 per share.
Raymond James & Associates Inc. industry analyst Marc DeRussy explained that investors likely believe that whatever happened at American Tower in the past cannot or will not greatly impact the company’s future earnings.
“The period in question was not on Jim Taiclet’s watch,” said DeRussy, noting that American Tower has made changes to its leadership team since the alleged backdating activities took place.
When the management changes are paired with the tower industry’s bullish expectations for growth, thanks to advanced network build-outs by carriers, the outcome is apparently confidence among American Tower’s stockholders.
But, DeRussy cautioned that it’s hard to guess how the SEC will rule on the options-backdating issue.
“There is no case-law for this. It’s a relatively new thing on Wall Street, and there is not a benchmark against which to compare it,” he said.
At issue is the illegal practice of “backdating” stock-option grants for employees, usually high-level executives. By manipulating the stock grant date of stock options, companies can match up a favorable stock price with an option after the stock market has run its course for a particular stock during a specific time period.
Done legally, companies award stock-option grants as incentives, hoping that employees will work hard to ensure that the company performs well, thus increasing its stock value. Backdating the options potentially allows employees to benefit regardless of how the company or the stock performs.
