Futures trading company Refco put its chief executive on leave Monday, after an internal review found a firm he controlled owed the company $430 million. The share price plummeted by 45 per cent, just two months after the company went public, reducing its market value by $1.65 billion.
Refco said its former chief executive and chairman Phillip Bennett, 57, has since repaid the debt with interest, but the company would continue investigations, delaying its quarterly filing with the Securities and Exchange Commission (SEC).
The New York-based commodities broker discovered that Bennett absorbed the $430 million debt into another company where he was chief executive, listing the amount as uncollectable for Refco.
Refco assured employees in a memo that it had “ample liquidity” to carry on day-to-day business. Bennett’s full repayment of the debt actually improved the company’s liquidity, but investors fearing more problems dashed to sell, dropping the stock price from $12.96 to $15.60. At the close of trading on Friday, Refco reported a market capitalization of $3.64 billion, a figure that dropped to less than $2 billion two days later when news of Bennett’s removal broke.
Bennett’s immediate successor will be William M. Sexton, who was executive vice president and chief operating officer. Sexton had planned to leave the company within the next few days.
Refco is already at the centre of a 4-year-old SEC investigation into its short sales of stock in Sedona Corporation, a software manufacturer.