Peregrine Systems Case Study

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Peregrine Systems, Inc. was a leading provider of Enterprise Service Desk software. Founded in 1981, Peregrine Systems, Inc. led its industry until an accounting scandal was uncovered in late 2002. The company when public in 1997 with its IPO on the NASDAQ listing shares at $9 a share. The company remained on the market until August 30, 2002 when it was delisted. The company’s external auditor just happened to be Arthur Andersen, one of the large accounting firms that no longer exists today. Peregrine Systems, Inc. later filed for bankruptcy and was eventually bought by HP, which still operates a portion of its company today.
Suspicion into Peregrine Systems, Inc. arose when the company reported 17 consecutive quarters of revenue growth that met or exceeded Wall Street analysts’ expectations. In 1999 Stephen Gardner, CEO made $4.5 million, the highest paid CEO in all of San Diego. In March of 2000 the stock price topped $79.50. Less than one month later the stock price was just $26.06 a share. Two years later, shares are trading at a low of $7 a share, being hit hard by the tech crash. On May 7th, 2002, Peregrine revealed that its books have been manipulated. That same day, Stephen Gardner the CEO and Matthew Glass, the company’s CFO both resign. That evening the stock closes at a minimal 89 cents.
On September 22, 2002, Peregrine Systems, Inc. filed for bankruptcy protection. This essentially cancelled all of its common stocks, which lead to a loss of over $4 billion dollars in shareholders equity.
The long SEC complaint alleges the company engaged in numerous fraudulent activities, which included filing material incorrect financial statements for 11 straight quarters between April 1999 and December 2001. Th...

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...tement to a federal official and was sentenced to 90 days of home detention and 200 hours of community service. John Benjamin, former Peregrine Treasurer was sentenced to probation after pleading guilty to conspiracy to commit wire fraud. Ilse Cappel, former Peregrine assistant Treasurer was sentenced to probation as well after he pled guilty to conspiracy to commit bank fraud. Finally, Peter O’Brien, former Peregrine Director of Alliances pled guilty to obstruction of justice and was sentenced to probation.
A 2005 HP press release documents the sale of Peregrine Systems to HP. HP acquired Peregrine in a cash merger for $26.08 per share, adding to a combined $425 million. Today, Peregrine’s software is sold through the arm of HP OpenView’s business unit in order to create the industry’s most comprehensive distributed enterprise management software solution.

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