3M stock has recently fallen amid mounting legal issues.
Cindy Ord/Getty Images for 3M
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material company
3M
It has faced legal problems in recent years. A little new one has just been revealed.
Friday, Securities and Exchange Commission announce 3M (Ticker: MMM) has been charged with violating the Foreign Corrupt Practices Act, an anti-bribery law relating to the company’s branch in China. The SEC said the company will pay $6.5 million “to settle accusations that it violated the books, records, and internal controls provisions of the FCPA.”
The SEC found that the Chinese subsidiary of 3M provides travel to Chinese government officials working at state-owned healthcare facilities. “This order highlights the risks to companies with global operations from inadequate internal accounting controls,” Charles Cain, head of the SEC’s Foreign Corrupt Practices Act Unit, said in a press release. “These risks here have been exacerbated by complicit third-party vendors.”
3M told Barron In an emailed statement, it discovered the issue in 2018. “Upon learning of this situation, 3M immediately reported these matters to the United States government and cooperated fully with its investigation,” it said. He has improved internal controls to try and prevent future problems.
For investors, $6.5 million isn’t a lot of money and the shares won’t be affected. 3M shares were up 0.4% in the early afternoon, in line with gains made in
Standard & Poor’s 500.
the
Dow Jones Industrial Average
rose 0.6%.
Investors focus more on two other legal issues. Chemicals referred to as PFAS produced by 3M and others have been found in groundwater. 3M recently announced a $12.5 billion settlement with US providers of process water. 3M still faces lawsuits over water pollution. It also faces lawsuits related to defective earplugs sold to the military.
The legal burden has been too much for the shares. 3M stock is down about 60% from its all-time high of around $250 a share in 2018. That has removed nearly $80 billion from market value. This is one way to measure how much investors discount 3M stock due to litigation issues.
The declines left 3M shares trading at nearly 10 times earnings estimates for 2024. In 2018, near the peak, 3M shares traded at about 22 times earnings in 2019.
If 3M shares trade for 22 times 2024 earnings, the share price will be about $215 a piece. This is still below its all-time high, which indicates that 3M’s business has suffered in recent years as well.
In 2018, 3M was projected to earn more than $11 a share in 2019. It ended up earning about $9 a share. Wall Street expects 3M to earn about $9.80 a share in 2024.
Write to Al Root at allen.root@dowjones.com
(tags for translation) machinery
