Omnicom claims it has cash for biz, capital requirements
NEW YORK — Those pesky government auditors now have their eyes on the ad biz.With stock scandals involving Enron, ImClone and WorldCom still roiling on Wall Street, ad holding company Omnicom has drawn the scrutiny of the Securities and Exchange Commision. The SEC recently made an informal request for information about the firm and its accounting methods. The timing could hardly be worse. The ad industry — hammered by recession and 9/11 fallout — is already grappling with Wall Street woes. Most stocks are in the tank, and the current market hysteria suggests that client companies aren’t likely to ramp up ad budgets anytime soon. Omnicom’s stock fell nearly 30% early June 27, rebounding to a 10.5% fall for the day, after Moody’s Investors Service put Omnicom’s unsecured debt rating under review. At issue is the way Omnicom has been accounting for its acquisitions. Omnicom recently acquired Los Angeles-based marketing firm Davie-Brown Ent., which quietly orchestrated for Omnicom’s BBDO such product-placement deals as the Pepsi Twist billboard and TV ad campaign featuring Mike Myers and Britney Spears from “Austin Powers: Goldmember” and comes with a movie product placement pact. Omnicom quickly sought to dispel investor panic, issuing a statement claiming that it has plenty of cash to meet all foreseeable business and capital requirements. But investors are, in fact, worried, particularly amid analyst downgrades. The SEC inquiry comes just as Omnicom and its rivals — Interpublic, WPP Group and Publicis — are aggressively exploring ways to enter the content business and just as Madison Avenue and Hollywood are getting cozier than ever. Still, at the moment there’s no evidence that the company has strayed from what are known as Generally Accepted Accounting Principles (GAAP). Stock of rival companies Publicis and WPP remained stable June 26. Interpublic, however, fell 7%.
Want Entertainment News First? Sign up for Variety Alerts and Newsletters!