Risk & Compliance

Tyson Shares Dip on News of SEC Subpoena

The 3.4% drop in the stock price follows Tyson's disclosure that the SEC is looking into allegations of chicken price-fixing.
Matthew HellerFebruary 7, 2017
Tyson Shares Dip on News of SEC Subpoena

Tyson Foods shares dropped more than 3% after the nation’s largest poultry processor disclosed that the U.S. Securities and Exchange Commission had opened an investigation into its chicken-pricing practices.

In a regulatory filing, Tyson said Monday it had received a subpoena from the SEC on Jan. 20 and it was “cooperating with the investigation, which is at an early stage.”

“Based upon the limited information we have, we believe the investigation is based upon the allegations in In re Broiler Chicken Antitrust Litigation,” Tyson said, referring to antitrust lawsuits filed last year by poultry buyers against Tyson and other producers that have been consolidated in Illinois federal court.

In trading Monday, Tyson shares fell 3.4% to close at $63.13.

Plaintiffs in the antitrust suits have alleged that beginning in 2008, broiler chicken producers conspired to artificially reduce the supply of broiler chickens for sale in the U.S., knowing that those supply reductions would increase prices.

“The chicken sector, which is dominated by a handful of large meat companies, has come under increased scrutiny over the past year as customers and farmers have alleged antitrust violations relating to pricing, production, and compensation,” Reuters reported.

Tyson Chief Executive Tom Hayes declined to share details about the subpoena on a conference call with reporters after the company posted better-than-expected quarterly sales and profit, reflecting higher beef and pork exports and lower livestock costs.

Net income attributable to the company rose to $1.59 per share in the quarter ended Dec. 31 from $1.15 a year earlier, while sales rose to $9.18 billion up from $9.15 billion. Analysts on average expected earnings of $1.26 and revenue of $9.05 billion, according to Thomson Reuters I/B/E/S.

“Tyson has sought to increase profit by selling more value-added items such as pre-seasoned products and heat-and-serve meals, which command higher margins than basic meats,” Reuters noted.