Brazilian company Americanas is accused of committing “multi-billion fraud” by minority shareholders

After discovering “accounting errors” worth 20 billion reais ($3.89 billion), the retailer Americanas SA (AMER3.SA) was the subject of a complaint on Friday from a group representing minority shareholders to Brazil’s securities commission.

The Abradin group demanded that the regulator CVM look into PwC, the retailer’s auditor, and accused Americanas of committing a “multi-billion fraud.”

After Sergio Rial, the company’s chief executive, resigned on Thursday citing the finding of anomalies, shares of Americanas fell more than 75%, wiping off 8.4 billion reais in market value.

“Calling it ‘inconsistencies’ is nothing more than an attempt to employ a euphemism for a multi-million dollar scam that not only ruined the shareholder assets but also damaged the integrity of Brazil’s capital markets,” Abradin said in a memo obtained by TradingTwist.

After dipping as much as 0.7% earlier in the day, the company’s shares increased by 9% in early trade on Friday.

Requests for comment from Americanas and PwC did not receive an instant response.

CVM had already disclosed that it would start three investigations into the retailer. In the interim, the corporation established an impartial committee to look into the situation.

Rial ascribed the discrepancies to variations in accounting for the financial cost of bank loans and debt with suppliers during a meeting with investors on Thursday.

“The enormity of the issue is what gets a lot of attention. It’s difficult to conceal 20 billion reals “Professor Eric Barreto of Insper in Sao Paulo claimed. “It was a presentation issue whether the operations were on the balance sheet. I’m not sure, though, if they were entirely on the sheet.”

The three Brazilian millionaires who created 3G Capital have long controlled Americanas. Its outlets are commonplace in shopping malls throughout Brazil, and its internet business is among the top ones in the nation.

The so-called “inconsistencies” are a hot topic of discussion among analysts and investment managers.

Because of inconsistent business communication, analysts at JPMorgan noted in a research note, “The market (including us) still does not completely understand what the full ramifications are for Americanas.”

Upon disclosing the issue on Wednesday, Americanas stated that it thought the irregularities’ cash impact was minimal, but that more internal investigation and work by outside auditors was still required.

Manager at FAMA Investimentos Fabio Alperowitch stated that the “opacity” of Americanas’ financial statements caused him to sell his investment in the company in 2019.

He tweeted, “All the proof of misbehaviour was there.

James Gulbrandsen, chief investment officer for Latin America at NCH Capital, believes that this is the largest scandal he has ever witnessed on the Brazilian stock exchange.

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