Why BT Group Stock Plunged Today

By Evan Niu, CFA Markets Fool.com

Image source: BT Group.

Continue Reading Below

What happened

Shares of BT Group (NYSE: BT) have plunged today, down by 21% as of 12:30 p.m. EST, after the company said a scandal regarding its business in Italy would cost significantly more than previously expected.

So what

Late last year, BT acknowledged some accounting errors within its Italian business unit, and at the time estimated that the company would record a charge of 145 million pounds ($182 million). BT's profits in Italy have been inflated for several years as a result. The company's announcement today that a third-party investigation by KPMG, one of the big four accounting firms, has concluded that "the extent and complexity of inappropriate behaviour in the Italian business were far greater than previously identified and have revealed improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions." The charge is now expected to be 530 million pounds ($665 million).

Now what

Continue Reading Below

BT's head of continental Europe is expected to resign as a result of the accounting scandal. The company said that for 2016 and 2017 guidance, adjusted revenue should now come in approximately 200 million pounds ($250 million) lower than previously expected. The impacts will likely drag on financial results for the next two fiscal years. BT has appointed a new head of its Italian unit, and suspended several members of the senior management team for the Italian segment.

10 stocks we like better than BT Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and BT Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 4, 2017

Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.