Caterpillar Exec & Directors Sued By Investor Over 2012 Acquisition and 2 Other Dow Movers to Watch

Caterpillar Inc. (NYSE:CAT): Current Price $82.54

Fallout from a 2012 acquisition has brought trouble for Caterpillar Chairman Douglas R. Oberhelman and 13 directors. They are accused of not heeding “red flags” that should have told them that they were paying too much for a Chinese mine-equipment maker.

In a complaint filed Monday at a federal court in Chicago, New Jersey, investor Michael D. Wolin claimed that Oberhelman, the directors, and Chief Financial Officer Edward J. Rapp breached their fiduciary duties to the company. It took a $580-million writedown in January on its acquisition of the Hong Kong-based ERA Mining Machinery Ltd. and its Zhengzhou Siwei Mechanical & Electrical Equipment Manufacturing Co.

Wolin said in the complaint that, “The red flags clearly show that Siwei was being overvalued by Caterpillar senior management, including Rapp and Oberhelman,” but the board “blindly acceded” to the deal.

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International Business Machines Corp. (NYSE:IBM): Current price $190.63

IBM shares were down over 2 percent in early-afternoon trading, subsequent to analyst Kulbinder Garcha at Credit Suisse cutting the stock to Underperform, writing that, “… future organic growth will be challenging. Organically we believe IBM is effectively in decline,” listing among the challenges the firm faces as “the shift to cloud” that “continues to present risks given IBM’s technology positioning.”

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Wal-Mart Stores Inc. (NYSE:WMT): Current price $78.10

Wal-Mart de Mexico has posted July sales at previously existing stores dropping by 3.1 percent while shares of Walmex, as Wal-Mart’s Mexican division is called, have dropped 1.9 percent Tuesday. The analyst Gustavo Piras Oliveira at UBS fears that even a pickup in Mexico’s slow economy might not give Walmex a big boost, observing that “Macro backdrop is still not supporting domestic consumption. Employment trends have been soft, remittances are down year-over-year, credit growth is moderating, and government spending remains low.

However, in its second-quarter release, Walmex acknowledged that Sam’s Club was underperforming other formats, dragging sales down and that it would take time to turn it around.”

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