Almost €3 billion has been wiped off the stock market value of Ireland's biggest company, pharmaceutical group Elan, after a Wall Street Journal report that was scathing of Elan's accounting policies.
At one stage, Elan shares were down by more than 30 per cent on the New York Stock Exchange, the main market for the shares. More than 30 million Elan shares - 15 times the average daily volume - traded as investors rushed to sell Elan and any other stock considered to have question marks over their accounting.
While the Wall Street Journal report drew parallels between Elan and Enron, the collapsed energy giant, the Irish company angrily rejected any comparison between the two companies. "Elan is highly solvent with $2 billion in cash," vice-president Mr Tom Lynch said.
Elan described the attack as "one-sided and ignores the growth in our pharmaceutical business". Mr Lynch said Elan had responded fully to "literally hundreds" of questions from the Wall Street Journal since last May. He said the company's accounting policies had been comprehensively reviewed by the Securities and Exchange Commission, the American stock markets regulator, as recently as 1999.
The main criticism of Elan by the Journal was its use of joint ventures which the newspaper said allowed Elan to shift research and development costs off its own books while simultaneously taking revenue from the joint ventures before they even had any products to sell. The newspaper quoted a former SEC chief accountant, Mr Lynn Turner, as stating: "I'm taking money out of one pocket and putting in another. That's a charade."
But Elan chairman Mr Donal Geaney said: "If we were booking revenues from joint ventures it would have been a charade but we're not doing that. That's simply inaccurate."
Elan said no new R&D joint ventures had been entered into since mid-2001. It said that while Elan's sales had grown by $1 billion since 1998, contract revenue from joint ventures had risen by just $70 million in the same period. "The Wall Street Journal has not mentioned the strong growth in marketed products, new product launches and corporate and product acquisitions in the period," the company said.
But Elan's rebuttal of the criticism had little impact on the market, and investors rushed to sell the stock in huge volumes.