Atos Drops the Most in Over Two Years on Accounting Errors

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Atos SE shares fell the most since 2018, knocking more than 1 billion euros ($1.2 billion) off its market value, after the French IT company disclosed that auditors had found accounting errors for two of its U.S. entities.

While the mistakes weren’t “material” to its 2020 financial statements, auditors found “several matters relating to internal control weaknesses over financial reporting process and revenue recognition,” the Paris-based company said in a statement on Thursday.

Atos fell as much as 22%, the biggest intraday decline since October 2018. The stock was down 9.5% to 57.04 euros at 11:27 a.m. in Paris trading.

The accounting disclosure is the latest blow for Atos’s management team, which walked away from a potentially transformational deal to buy U.S. rival DXC Technology Co. in February that would have helped the company build an IT giant that could better compete with rivals like SAP SE and Accenture Plc.

“Combined with the diminished investor confidence in management strategy on the back of the recent M&A announcement, and indeed the continued skepticism around the rationale for that move, we now believe that the overhangs more than offset other positives,” Citigroup Inc. analyst Amit Harchandani said in a note on Thursday downgrading the shares to neutral.

The two U.S. businesses -- Atos IT Solutions and Services Inc. and Atos IT Outsourcing Services LLC -- represent 11% of the company’s 2020 revenue, the company said in the statement. North America as a whole represents about 23% of Atos’s annual sales, and the company’s built out the business with more than half a dozen deals in the last five years, according to data compiled by Bloomberg. The largest was the 2018 purchase of U.S. competitor Syntel Inc.

North America was Atos’s most profitable region last year and uncertainty about the market could leave the company “dealing with an overhang for some time,” Bloomberg Intelligence analyst Tamlin Bason said in a note.

The company also said its annual general meeting will be held on May 12.

©2021 Bloomberg L.P.

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