Unique Fabricating (NYSE: UFAB) tells us that they can't file their necessary accounts on time to keep their stock exchange listing. Well, that's the sort of thing that happens sometimes and there are useful and usual systems to deal with this sort of thing. The most obvious of which is to file a report to the SEC's Edgar system about what is wrong, how it is being addressed and therefore what is going to happen. Which is just what Unique has done. The big question for us all though is why has the stock risen 141% on the back of such an announcement?
The Edgar report is that: “the Company's internally prepared monthly financial statements for November 2022, which are required to be provided to the Company's bank lenders, were reported inaccurately.” Oh, right. They then go on to say that no actually released to the market results seem to have been affected but they can't be sure. Until this is all sorted they cannot, therefore, file the accounts necessary to keep the quotation. Well, fair enough. But that's not, in fact, the important part of the information release. We could read that and think, well, just some accounting, she'll be fine. But perhaps we shouldn't read it that way.
Unique Fabricating share price from NASDAQ
We're clearly reading that release the other way around than the rest of the market, For to us this is the important line: “The Company is currently operating past the expiration date of the forbearance period under its forbearance agreement with its bank lenders with respect to its credit agreement and has not been able to negotiate an extension of the forbearance period or a waiver of the defaults under the credit agreement. There is no assurance that its lenders will allow the Company to borrow under the line or that the Company will be able to extend the forbearance period or obtain waivers of defaults. A failure or refusal to permit the Company to access its credit facilities would render the Company unable to satisfy its liabilities as they come due in the ordinary course of business.”
That is, the danger to the business is not what the NYSE or SEC might do, it's what the company bankers might. And they're much less forgiving of whatever this accounting difficulty is. We read that - and yes, we know it is in part at least just boilerplate - s being that the explanations of that November little bookkeeping problem haven't left the banks happy, Given that the company depends upon credits from banks, well, that's a problem.
And most certainly we can't understand why a company that has just admitted that its continued survival depends upon the goodwill of its bankers should see its stock price jump 141%. We think that might be an error by market opinion there.
