XPO Logistics, Inc. (XPO) Accused of Dubious Tax Accounting To Cover Financial Strain

According to the complaint against the company's officers and directors for alleged violations of the Securities Exchange Act of 1934 between February 26, 2014 and December 12, 2018, Fortune Magazine noted that XPO “has grown from $177 million in sales in 2011 to $17 billion today, thanks largely to an incredible run of acquisitions.” CEO and Chairman of the Board Bradley Jacobs' tenure at XPO has been characterized by an aggressive mergers and acquisition strategy. On August 2, 2017, Jacobs announced plans to earmark up to $8 billion for additional acquisitions. On December 12, 2018, Spruce Point Capital Management published a report asserting that XPO was covering financial irregularities, and that it had evidence to suggest XPO was utilizing dubious tax accounting methods and aggressive amortization assumptions amongst other factors to portray glowing 'Non-GAAP' results. By Spruce Point's calculations, XPO's acquisitions had "generated $73m of cumulative adjusted free cash flow in an expansionary economic period… indicative of a failed business strategy yielding a paltry 1.2% return on invested capital." Following the publication of the Spruce Point report, XPO's stock price fell $15.77, or 26.17%, to close at $44.50.

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