@Dominator me too. $HCL was near the top of my small cap watchlist. I wanted to wait and see how the relocation of manufacturing to the US went and see some more results. I saw the inventory build as part of managing through the shutdown, and I still don’t understand what’s happened, as it produces a durable good, so what specifically triggered the audit observation?. (I haven’t read all the straws as I’ve been focused on results of my current holdings). News over the last few days is a complete shock, and I guess my question to those Strawpeople who know it well is, what did I miss?

I saw the inventory build as part of managing through the shutdown, and I still don’t understand what’s happened, as it produces a durable good, so what specifically triggered the audit observation?

My best guess here is that when inventory represents ~60% of the equity value of the company, and gross margins look the way they do (25% GPM in 2H23 etc), the new auditor is going to have a look at it. Those are pretty razor thin margins and self-evidently management have a lot riding on clearing inventory. Perhaps the GPM indicated they were already heavily discounting and the auditors sniffing around carrying values? That might also explain the trading loss excluding the inventory write down. The question at this point is how bad are the inventory problems and whether they can get out of it without a cap raise? Brave soul to be dipping in here even if the SP has been hammered.

Based on how the update was written it sounds as though the Board were caught by surprise when they sat down to review the financial accounts. Given they would meet regularly throughout the period, it does make it seem as though the CEO and potentially other execs were hiding how bad things were.