Introduction
I found Peregrine's story on the Internet while doing a Google search. As I was reading "Financial Shenanigans" from Horward Schilit to prepare for the level 2 of the CFA examination, I decided to have a closer look at the financial statements of Peregrine Systems Inc. that were published before the shenanigans became publicly known (in May 2002) in order to detect those shenanigans solely based on those financial statements ? more specifically on the forms 10K filed by Peregrine between 1998 an 2001.
Here is a summary of the story, quoted from the court that had to rule on those irregularities:
1.Peregrine Systems, Inc. ("Peregrine") was a computer software company headquartered in San Diego, California. Peregrine was incorporated in California in 1981 and reincorporated in Delaware in 1994. From its initial public offering ("IPO") in April 1997 until it was delisted on August 30, 2002, Peregrine was a publicly held corporation whose shares were registered securities traded under the symbol "PRGN" on the National Association of Securities Dealers Automated Quotation system ("NASDAQ"), a national securities exchange that used the means and instrumentalities of interstate commerce and the mails.
2. Peregrine developed and sold business software and related services. Software license fees accounted for the bulk of Peregrine's publicly reported revenues. Peregrine sold its software directly through its own sales organization and indirectly through resellers such as value added resellers and systems integrators.
3. From its IPO in April 1997 through the quarter ended June 2001, Peregrine reported 17 consecutive quarters of revenue growth, always meeting or beating securities analysts' expectations. Peregrine's stock price soared from ...