SummaryWe think Peabody Energy is playing Disclosure Games with investors regarding SEC investigative activity. This could easily compromise your capacity to assess debt and other fundamentals.
Prairie State Energy is at the center of an SEC probe dating back to 2013. Our data suggests it may have started in 2012.
Since May 2014, Peabody has repeatedly said it not heard from the SEC on the Prairie State matter since August 2013.Toshiba TransducerThis gives the clear impression the investigation is over.
But data recently received from the SEC under the FOIA confirms enforcement proceedings were recently ongoing and that there were multiple probes of Peabody at time of our request.
While this could be serious, it may not be. The mere existence of an investigation should not be construed as an indication that any violations of the law have occurred.
Note: Our Disclosure Insight reports provide commentary and analysis on public company interactions with investors and with the SEC. They are heavily reliant on our expertise with using the Freedom of Information Act (FOIA). This report was published to the Probes Reporter website for free.
Confirmed, undisclosed SEC investigation of Peabody Energy Corp. (NYSE:BTU). Maintained on Watch List, Added to Disclosure Games List.
Analyst Summary: We think Peabody Energy is playing Disclosure Games with investors regarding SEC investigative activity. Last week Peabody Energy announced the sale of its position in Prairie State Energy, an entity which the company claims is at the center of an SEC probe dating back to 2013. Some may be inclined to praise management for its sale of BTU's position in Prairie State. We suggest more information is needed before one takes to the pom poms. Data recently received from the SEC is in stark contrast to company disclosures regarding related investigative activity.
"Disclosure Games" is a term we use to highlight those public companies engaging in disclosure practices we find as misleading, confusing, evasive, or otherwise lacking the transparency needed for investors to make well informed investment decisions regarding a potentially material exposure.
Analysis and Opinion: Data recently received from the SEC (in response to a FOIA request) has two disturbing reveals: First, the SEC confirmed enforcement proceedings were on going at Peabody Energy as of . We were also told there is/were multiple SEC probes.
Repeatedly, and as recently as an 8 K filed in Dec 2015, Peabody's disclosures give the [clear] impression there was only one SEC investigation, it involved Prairie State, and the company has repeatedly said this about its status; that it's, "not received any related communication from the SEC since August 2013."
The incongruity between these sets of contrasting data now leaves investors in the dark regarding how the sale of the Prairie State asset will impact the company going forward or if there is cause to worry about other SEC risk. Worse, it also brings into question the motives, if not the integrity of management.
We don't know what the multiple probes are/were about, nor do we know why the SEC investigated BTU's Prairie State involvement. Company filings only speak to one investigation that pertained to, "the development of Prairie State". (note: In a 12 Jun 2013 response to an SEC comment letter, the company stated commercial operations at the Prairie State Energy Campus commenced in 2012. It's worth noting, for reasons unknown, it did not take long after for the SEC to then start an investigation into that entity.)
Updates on SEC activity at Peabody merely repeat in form and substance what's been disclosed earlier without any helpful update. The disclosure related to not hearing anything from the SEC since Aug 2013 is repeated in the following filings: 10 Q filed in May 2014; 10 K filed on 25 Feb 2015; 10 Q's filed on 07 Aug 2015, and 09 Nov 2015; and, an 8 K filed on 14 Dec 2015.
Now it's time to ask: Who does that? That is, who continues to disclose some long ago SEC investigation well after it supposedly ended?
Dear reader, whenever you see a disclosure like this, we recommend you absolutely assume there is some reason company lawyers decided it had to stay and stay and stay. If this is BTU's version of transparency, we say it fails.
We don't know why the SEC decided to investigate, what was found, or if this had impact on the company's newly announced sale of the asset. The related disclosures give nothing regarding how Prairie State figured or will figure into BTU's overall accounting or its potential impact on the income statement or balance sheet.
Facts of Interest or Concern: Our work first turned up SEC investigative activity at Peabody in Aug 2012. The company first disclosed a SEC probe in Feb 2013. At that time, the company said it received a subpoena in Jan 2013, but we don't know if that was the first contact with the SEC or if there have been more subpoenas. Subpoenas are only issued in formal probes, but Peabody never directly said its SEC probe is formal. This almost certainly started earlier as an informal investigation which the company waited to disclose. The FOIA response of Aug 2012, cited just above, supports this.
Company disclosures (cited below) give the impression the probe disclosed in Feb 2013 has been a non event for the company since Aug 2013. This is why, when in Mar 2015, the SEC had previously confirmed that this company was involved in an active and ongoing investigation, we wrote it up as undisclosed at the time. There was no other conclusion to reach as company disclosures clearly suggest the matter has been effectively dead since Aug 2013.
Closer to the present, in a letter dated we received new information from the SEC suggesting, again, this company was involved in unspecified SEC investigative activity.
In a letter dated (excerpt posted below), the SEC again confirmed Peabody's involvement in on going enforcement proceedings. Our position is this remains undisclosed. Again, BTU's disclosures are clear in saying the company, "has not received any related communication from the SEC since August 2013", on the Prairie State matter.
Click to enlarge
In that same letter of , the SEC said that while its need to block our access to records, "still applies to certain of the requested records, it no longer applied to the other records requested." The related records were remanded to the FOIA Office of the SEC for further processing.
In a footnote, the SEC also said, "At the time the FOIA Office processed your request [08 Sep 2015], there were multiple pending law enforcement proceedings on which [the law enforcement exemption of the FOIA] was asserted to withhold any potential responsive records."
In a letter of , the FOIA office then informed us there were no records available for release on the remanded matter(s) involving Peabody Energy. No further information was provided in this response.
Here's a summary of the Disclosure Games we found Peabody Energy used and/or continues to use:
Delay of greater than 10 days in disclosing an SEC investigation. SEC confirmed active and ongoing investigative activity that was undisclosed at the time. SEC investigative disclosures lacked detail on the nature of the probe sufficient to permit independent analysis of the risk it entails. SEC investigative disclosures lacked detail on time of first contact with SEC. A disclosed SEC investigation that was unspecified as to whether informal or formal. Investigation appeared to be formal; company failed to give prominence to this potential. Formal SEC investigative disclosures lacked detail on who received subpoenas. Formal SEC investigative disclosures lacked detail on what information subpoenas sought. Disclosures lacked detail on when the company was informed the probe became formal. Subsequent disclosures on SEC investigative activity fail to provide meaningful updates.
Notable Disclosures: Below are the disclosures we found on a solo SEC investigation of Peabody Energy, first disclosed in Feb 2013.
Initial disclosure: From the 10 Q filed on 25 Feb 2013 Here the company discloses receipt of a subpoena from the SEC.
