Shares in Kraft Heinz dived more than 25 per cent at the open on Friday as Wall Street reacted with alarm to a “disastrous” update in which the food company disclosed it had received a subpoena from the US Securities and Exchange Commission.
About $15bn was wiped from the market capitalisation of the company behind HP Sauce, Heinz Salad Cream and Oscar Mayer hot dogs. Shares are set for their biggest one-day drop on record and fell to their lowest level since the group was created in 2015 by the mega merger of Kraft and Heinz, engineered by the Brazilian investment firm 3G Capital.
The sell-off came after the company issued a raft of gloomy disclosures after the stock market closed on Thursday. Kraft Heinz took a $15.4bn impairment charge as it reduced the value of goodwill at its US refrigerated and Canada retail businesses and its Kraft and Oscar Mayer brands.
The SEC subpoena, which the Chicago-based company said it had received in October, related to its “accounting policies, procedures, and internal controls” in procurement.
Kraft Heinz also slashed its dividend by a third and said it was eyeing divestitures in an effort to short up its balance sheet.
The developments had “the hallmarks of a company that has a serious balance sheet problem”, said Robert Moskow, analyst at Credit Suisse, who described the update as “disastrous”.
Kraft Heinz said it was co-operating “fully” with the SEC. “The company is in the process of implementing certain improvements to its internal controls to mitigate the likelihood of this occurring in the future and has taken other remedial measures,” it said.
“The company does not expect the matters subject to the investigation to be material to its current period or any prior period financial statements,” it added.