What is the potential financial impact of the securities fraud investigation on Coty's balance sheet and earnings outlook?

The securities‑fraud probe adds a material contingent liability that could drain cash reserves and increase debt on Coty’s balance sheet. Even a modest settlement (e.g., $100‑$200 million) would require a new reserve, shrinking working‑capital and potentially forcing the company to tap its revolving credit facility, which is already modest for a consumer‑goods player. If the investigation triggers a restatement of the Q4 2025 results, earnings per share could be revised lower, compressing the FY‑2025 guidance and pressuring the valuation multiples that are already trading at a discount to peers. In short, analysts should begin to model a “worst‑case” earnings hit of roughly 5‑8 % and a corresponding 2‑3 % reduction in cash‑equivalents to capture the upside risk of a larger-than‑expected charge.

From a trading perspective the stock is already in a down‑trend, with the 50‑day SMA broken and volume spiking on the announcement. The nearest technical support sits near $4.85; a breach could open the path to the $4.40–$4.20 range, making a short‑or‑protect‑put play viable for risk‑averse traders. Conversely, if the company announces a limited, swiftly settled claim and re‑affirms its FY outlook, a short‑cover rally could target the $5.30–$5.50 resistance zone. Keep a close eye on any SEC filings or management commentary over the next 4‑6 weeks for clues on liability size, as that will dictate whether the risk‑adjusted upside remains attractive.