Stirling Homex Corporation
The Stirling Homex Corporation was an American manufacturing company based in Avon, New York. It produced modular prefabricated homes. It went bankrupt in 1972.
History
[edit]Stirling Homex Corporation was a company founded by two brothers, David and William Stirling. It manufactured and located modular homes.[1] It became a publicly-traded company on February 20, 1970.[1][2] At its initial public offering, the company's stock sold at $16.50 per share. By the middle of March, its stock traded at $51 per share.[1]
Stirling Homex misled investors by inflating its reported revenue, stating in its consolidated financial statements that the value of completed housing modules which were assigned to contracts were counted as revenue and asserting that said contracts were backed by the United States Department of Housing and Urban Development. In reality, most contracts were not backed by the federal department and revenue was reported for homes which were not paid for and which had not been turned over to customers.[3]
On July 7, 1972, ten banks demanded Stirling Homex pay off $38.8 million in loans early, citing company deviations from the terms of their credit agreements.[4] The company announced the resignation of the Stirling brothers from their posts and that it would file for bankruptcy on July 10.[1][4] At that time, the company had produced about 10,000 housing units with a collective value of about $35 million. Of these, only 900 had been sold and paid for, while most were left in fields around the United States wrapped in plastic.[1] By August, the company's shares were trading at less than one dollar in value on the stock market.[5]
In 1975 the company's executives were charged with fraud and conspiracy and in 1977 four of them were sentenced to short prison terms by federal judge Marvin E. Frankel.[citation needed] The SEC also took punitive action against the company's auditor, Peat Marwick, banning the firm from obtaining new corporate clients for six months and requiring it to review its auditing methods.[6]
References
[edit]- ^ a b c d e Viebig et al. 2008, p. 21.
- ^ Buyer, Bob (July 9, 1970). "Housing in a Hurry– From Stirling Homex". Buffalo Evening News. p. B-6.
- ^ Viebig et al. 2008, pp. 22–23.
- ^ a b Ehrbar, A. F. (July 11, 1972). "Stirling to File Bankruptcy". Democrat and Chronicle. p. 8D.
- ^ Skala, Martin (August 21, 1972). "Modular housing still alive". The Courrier-News. p. 32.
- ^ Markham 2006, p. 174.
Works cited
[edit]- Markham, Jerry W. (2006). A Financial History of Modern U.S. Corporate Scandals: From Enron to Reform. M. E. Sharpe. ISBN 9780765615831.
- Viebig, Jan; Poddig, Thorsten; Varmaz, Armin, eds. (2008). Equity Valuation: Models from Leading Investment Banks. John Wiley & Sons. ISBN 9780470758809.