What happened?
Bloomberg reporting overnight SAP/Carahsoft price fixing investigation that first appeared last week could have a ''far broader'' scope than initially estimated. No further details have been provided however.
BNPP Exane View:
The immediate reaction last week to the first news reports of SAP / Carahsoft and a potential DoJ investigation saw the shares drop 4%, though had recovered over the next 5 days and extend beyond (before heightened geopolitical risks in Israel/Lebanon have led the market lower again this week).
Given the limited information at this stage, simplistically we tether the near term share price sensitivity to the potential DoJ fine impact to SAP 2025e FCF (EUR8bn target). As a proxy SAP earlier this year settled its South African bribery case with the DoJ for EUR200m (case under previous Co. mgmt). For the shares to be down MSD % on this news we believe the market would be pricing in a EUR400-500m DoJ settlement or 2-2.5x the previous DoJ settlement.
Share price risk: While this latest news update suggests the scope could be wider (implying risk of a larger potential fine) we believe the share price recovery last week after the initial move lower indicates investors'' more sanguine view on the case (for now) and we would see a low-single digit % downside risk today on the news.
Investor sentiment: We had a lot of investor debate last week on this. Most concern was reputational / governance related and the potential risk to future US Govt sales (likely LSD % Group mix), rather than the quantum of a settlement impacting FCF.
Co. Comment: SAP has thus far issued brief statements last week (see our previous communication for detail) simply stating it has been / is continuing to fully cooperate with authorities in the investigation.
Bloomberg article (link): U.S. prosecutors are aiming to investigate business that SAP and tech reseller Carahsoft Technology have done with nearly 100 government agencies as part of a wider...
