The retailer said the resignation was in its best interest after its board reviewed Blue Orca's allegations that Samsonite's CEO falsified educational credentials. Chief financial officer Kyle Francis Gendreau has taken over as CEO.

(Bloomberg)—In a dramatic takedown by a short seller of a world-famous brand’s top leader, Samsonite International SA’s CEO resigned after an attack on his credentials and the company’s corporate governance.

The world’s largest luggage maker said CEO Ramesh Tainwala has stepped down, according to a statement Friday. Samsonite said the resignation was in the company’s best interest after its board reviewed Blue Orca Capital LLC’s allegations that Tainwala falsified educational credentials. Chief financial officer Kyle Francis Gendreau has taken over as CEO.

The company also released a detailed rebuttal of Blue Orca’s allegations of accounting lapses and poor corporate governance.

In Blue Orca’s attack against Mansfield, Massachusetts-based Samsonite, Aandahl accused Tainwala of claiming to hold a doctoral degree in business administration from the Union Institute and University in Cincinnati. His official biography on Samsonite’s website does not make this claim, and the company noted Friday that its disclosure of Tainwala’s background has been accurate since the company’s Hong Kong initial public offering in 2011.

However, a reference on a website for businesses connected to Tainwala’s family said the group’s flagship “was founded in September 1985 by Dr. Ramesh Tainwala.” The Wall Street Journal reported last week that Tainwala said in an email he never claimed to hold a doctoral degree. He told the Journal he had enrolled for the Ph.D. program in 1992 and friends and colleagues jokingly addressed him as “doctor” afterward.

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Tainwala didn’t respond to an email, and the company hasn’t made him available for comments.

Tainwala started off as a commodities trader before getting into the luggage business as a maker of the plastic sheets that are molded into suitcases. His ties as a supplier to Samsonite led to a joint venture in the late 1990s to manufacture international-quality luggage in India. Tainwala subsequently rose within the ranks at Samsonite, becoming head of Asia-Pacific by 2011 and CEO in 2014.

Samsonite is No. 152 in the newly released Internet Retailer 2018 Top 1000. The luggage retailer purchased Tumi Holdings Inc. in 2016 for $1.8 billion and web-only travel bag retailer eBags Inc. in 2017 for $105 million.

Samsonite rebuttal

Blue Orca’s report also questioned related-party transactions between Samsonite and Indian entities controlled by Tainwala and his family. The short seller alleged Samsonite concealed slowing growth with debt-funded acquisitions, including its 2016 $1.8 billion purchase of Tumi, and inflated profit margins with questionable accounting linked to its takeovers.

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“The company’s board of directors stands behind its track record of transparency and corporate governance,” Samsonite said in the statement. “The company’s consolidated financial statements and the related notes to the consolidated financial statements, which are audited by KPMG LLP, are in accordance with International Financial Reporting Standards.”

No more risks

Terry Hong, an analyst at Guotai Junan Securities Co., said Tainwala’s departure removes risks for investors. “The company has provided a very strong clarification with solid evidence,” he said. “It will help investors rebuild confidence on the financial performance of the company.”

The short seller’s attack on the dominant player in the $19 billion luggage market claims a CEO who has helped the company grow through acquisitions since taking the helm in 2014. The accusations have dented Samsonite’s shares after they almost doubled over the past two years to a record in April, driven by a spate of deals including the $1.8 billion purchase of Tumi.

The resignation is one of the biggest victories in Asia for activist short sellers, who have typically targeted less recognizable companies, with mixed results. In Hong Kong, a broad market rally has caused many bearish wagers to backfire, while investors in Japan have shrugged off many short-seller attacks.

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It’s also the latest in a winning streak for Blue Orca’s founder, Soren Aandahl. Before Samsonite, the then-director of Glaucus Research Group, targeted Australian money manager Blue Sky Alternative Investments Ltd., whose shares fell almost 80% after Aandahl’s report. Glaucus’s claims last year that Australian sandalwood company Quintis Ltd. made misleading disclosures sent its shares down 79% before its suspension from trading.

“The work done by Soren is nothing short of outstanding,” said Marc Cohodes, a Cotati, California-based short seller. Regulators should look closely at the allegations made in the report, he said.

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