The U.S. Securities and Exchange Commission is investigating whether Boeing Co. (NYSE:BA) properly accounted for the costs and expected sales of two of its best known jetliners, according to people with knowledge of the matter. Boeing Co.'s stock BA, -9.42% was tumbling $12.36, or 11%, to a 2 1/2-year low in morning trade Thursday. The stock's previous biggest price drop was $11.43 (8.9%) on Jan. 27, 2016 after Boeing reported fourth-quarter results. The stock's price drop was shaving off about 85 points from the Dow Jones Industrial Average DJIA, -2.11% which is a price-weighted index.
The probe, which involves a whistleblower’s complaint, centers on projections Boeing made about the long-term profitability for the 787 Dreamliner and the 747 jumbo aircraft, said one of the people, who asked not to be named because the investigation isn’t public. Both planes are among Boeing’s most iconic, renowned for the technological advancements they introduced, as well as the development headaches they brought the company.
Underlying the SEC review is a financial reporting method known as program accounting that allows Boeing to spread the enormous upfront costs of manufacturing planes over many years. While the SEC has broadly blessed its use in the aerospace industry, critics have said the system can give too much leeway to smooth earnings and obscure potential losses.
“We typically do not comment on media inquiries of this nature,” Boeing spokesman Chaz Bickers said in an e-mailed statement. SEC spokesman John Nester declined to comment.