The $160M average gain matching the $150M average fine is the headline but the differential between targeted and non-targeted companies is where the more dangerous information lives. The market drew a map on the day of that executive order. Every company that saw an anomalous gain was being priced as a likely future briber. That map is now embedded in the share price data as a permanent record of which companies investors believe benefit most from the absence of enforcement.
The irony is that the market reaction created the evidence base for future prosecution. If FCPA enforcement is ever reinstated under a different administration, the February 2025 abnormal returns become the obvious starting point for investigation. the companies that celebrated the suspension are now carrying an empirical marker in their own share price history that says "the market believed we would bribe." thats an asymmetric risk the current pricing doesnt reflect because its treating non-enforcement as permanent when its actually a political variable with a four-year half-life at most.
Your comment implies that the DOJ or SEC will have enough funding to go after these guys in the future. I don't think that assumption is going to be correct.
I recall a previously successful company by the name of Petrofac, with a variety of accusations around bribes for contracts in the middle east, which took years to investigate and confirm, during which time it's customers went elsewhere. It may simply be a coincidence that the evidence was supplied and leaked over a very long period of time allowing rival firms to pick up additional business. But we might also speculate on why the regulators allow such a situation to occur, well knowing the damage it causes to individual firms. We can ask whether we assume the only miscreants are on the commercial side of the processes we rely upon to 'regulate' our industries. Does anyone know if there is any correlation between a regulatory career followed by a lucrative retirement consultancy?
I haven't checked Transparency International's corruption index on the US since the trump crime syndicate has taken over but it's far worse than that: last year the Supreme court I think 6-3 legalised corruption: that a bribe or corruption isn't a bribe or corruption if the gift is received after the event it was alleged to be linked to. So any official can now receive a bribe as long as it happens after a piece of legislation or decision is taken. Therefore, companies can bribe officials as long as the gift comes after the favour it's intended for. So technically there is no more corruption in the US. Bribery is incentivization, war is peace and ignorance is strength!
Next thing you know administration officials will be launching meme coins to facilitate bribery.
Don't be silly. That would never happen...
The only response I have to this news, is...
Yuck.
The $160M average gain matching the $150M average fine is the headline but the differential between targeted and non-targeted companies is where the more dangerous information lives. The market drew a map on the day of that executive order. Every company that saw an anomalous gain was being priced as a likely future briber. That map is now embedded in the share price data as a permanent record of which companies investors believe benefit most from the absence of enforcement.
The irony is that the market reaction created the evidence base for future prosecution. If FCPA enforcement is ever reinstated under a different administration, the February 2025 abnormal returns become the obvious starting point for investigation. the companies that celebrated the suspension are now carrying an empirical marker in their own share price history that says "the market believed we would bribe." thats an asymmetric risk the current pricing doesnt reflect because its treating non-enforcement as permanent when its actually a political variable with a four-year half-life at most.
Yes, like modern day Lady MacBeths, they won't be able to shred/data delete their way out of this.
Your comment implies that the DOJ or SEC will have enough funding to go after these guys in the future. I don't think that assumption is going to be correct.
I recall a previously successful company by the name of Petrofac, with a variety of accusations around bribes for contracts in the middle east, which took years to investigate and confirm, during which time it's customers went elsewhere. It may simply be a coincidence that the evidence was supplied and leaked over a very long period of time allowing rival firms to pick up additional business. But we might also speculate on why the regulators allow such a situation to occur, well knowing the damage it causes to individual firms. We can ask whether we assume the only miscreants are on the commercial side of the processes we rely upon to 'regulate' our industries. Does anyone know if there is any correlation between a regulatory career followed by a lucrative retirement consultancy?
Oh, the revolving door is alive and well: https://klementoninvesting.substack.com/p/regulatory-capture-is-real
Perhaps the outperformance of companies under investigation is the belief that they'll be even-more aggressive with future bribes. So much winning!
I haven't checked Transparency International's corruption index on the US since the trump crime syndicate has taken over but it's far worse than that: last year the Supreme court I think 6-3 legalised corruption: that a bribe or corruption isn't a bribe or corruption if the gift is received after the event it was alleged to be linked to. So any official can now receive a bribe as long as it happens after a piece of legislation or decision is taken. Therefore, companies can bribe officials as long as the gift comes after the favour it's intended for. So technically there is no more corruption in the US. Bribery is incentivization, war is peace and ignorance is strength!