The stock market policeman investigates the compliance of Casino share buybacks in 2019

Posted on Oct 14, 2021, 7:17 PM

An investigation by the Autorité des Marchés Financiers (AMF) is chasing another. In December 2019, the stock market policeman decided to dismiss the Muddy-Waters Casino case, one of the most resounding cases of recent years. The investigation then focused on financial information and the Casino and Rallye securities market from 2013 to 2018 and on the actions of the Carson Block company.

The timing and purpose of the share buybacks questioned

The stock market policeman again took an interest in Casino and Rallye titles. According to “Challenges”, the AMF investigated the share buybacks made in May 2019 by Casino, just before Rallye, its parent company, was placed in safeguard proceedings on May 23, 2019. This procedure aimed to freeze the group’s liabilities to give it time to restructure its debt; Rallye will be released at the end of February 2020. At the time, the timing and purpose of these share buybacks had challenged financial analysts. Some people wondered, since the two companies were controlled by Jean-Charles Naouri, if there was no conflict of interest: wouldn’t the Casino share buybacks help Rallye, to the detriment of Casino which also needed free cash flow?

These securities transactions were part of a share buyback program planned by the group and approved at a general meeting by Casino shareholders. But, in theory, companies cannot buy back shares if they know that a significant event that could impact the share price is brewing. However, the MAR (on market abuse) regulation provides for exemptions from these intervention restrictions. For the AMF, the question is whether these redemptions were carried out automatically by the broker responsible for implementing the program, or whether they were dictated by Rallye.

According to our information, the investigation would have started at the end of 2018, after the Casino title was strongly attacked by short sellers. It would be larger than the 2019 share buybacks alone. It would relate to Casino and Rallye shares from 2018.

In any case, this is not the first time that the AMF has looked into possible links between share buybacks and price manipulation. Asked by the National Financial Prosecutor’s Office (PNF) (itself seized by Covea), in March 2021, it examined closely the conditions of share buybacks by SCOR between the end of October and mid-December 2018, and their impact on the share price. She had concluded that the information at her disposal did not allow her to substantiate allegations of price manipulation.

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