Fatburger parent's stock craters after firm reveal probe into CEO
Key takeaways:
- Fat Brands' stock cratered Tuesday morning after the firm announced its CEO Andrew Wiederhorn is under inquiry.
- Investigators are looking into Wiederhorn's financial transactions and benefits and compensation that his household might have got.
- Fat Brands stated in a regulatory filing it is cooperating with the probe.
Stocks plunge after the firm's CEO undergoes inquiry:
Shares of Fat Brands cratered almost 20% on Tuesday morning after the Fatburger and Johnny Rockets parent revealed that its CEO has been under probe for months.
In a regulatory filing, Fat Brands stated the U.S. Attorney's Office for the Central District of California and the Securities and Exchange Commission told the firm in December that they had started probing CEO Andrew Wiederhorn.
According to the filing, the government is aiming for documents and materials linked to Fat Brands' coalition with Fog Cutter Capital Group in December 2020 and dealings between Wiederhorn and those entities. Fog Cutter Capital is the biggest shareholder of Fat Brands, and Wiederhorn is its bulk shareholder.
Investigators are also looking into compensation, extensions of credit, and other advantages that Wiederhorn or his household may have. Wiederhorn's son Thayer acts as a chief operating officer of the firm.
The revelation followed a Los Angeles Times report on Saturday that the accusations against Wiederhorn have securities and wire scam, money laundering, and tried tax evasion. The newspaper also noted that federal agents raided the residence of Thayer Wiederhorn and his spouse Brooke — daughter of ex "Real Housewives of Beverly Hills" celebrity Kim Richards — in December.
"The government has declared FAT Brands of its probe, and the Firm is fully cooperating," Fat Brands stated in a statement to CNBC. "The Company is not a target of the inquiry."
Fat Brands stated in the filing that it isn't able to assess the effect or time of the government probes.