OMNICOM STOCK REBOUNDS AFTER 16% DROP ON RUMORS

WSJ Story Sparked Talk of Accounting Problems

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NEW YORK (AdAge.com) -- Omnicom Group's stock gained back a third of last week's losses today as investors got to read a report in The Wall Street Journal that had led to widespread speculation of accounting irregularities at the agency company.

Omnicom also got a boost from Morgan Stanley & Co., which upgraded the stock to "overweight." Analyst Michael Russell called the stock's decline "overdone" and said in a report that the article has "turned out to be benign."

Mr. Russell also upgraded the advertising industry sector to "attractive," expecting improvement in the second half.

Departure from board
Omnicom's stock had

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dropped nearly 16% last week as rumors spread that the departure of board member Robert J. Callander was due to accounting irregularities.

The article in the Journal quoted unnamed sources who said Mr. Callander -- who headed the board's audit committee -- resigned after disagreeing with management over its limited disclosure of Omnicom's stake in Seneca Investments LLC, an e-services holding company formed last year.

Seneca was formed after Omnicom traded its stake in Communicade -- a wholly owned subsidiary that functioned as a holding company for its investments in 16 online shops -- to investment group Pegasus Investors II in exchange for preferred stock in Seneca.

$280 million
Omnicom has not spelled out what size stake it owns in Seneca, but its 2001 annual report valued the equity at $280 million.

Omnicom gained 5.94% today to close at $77.01 on the New York Stock Exchange. Trading was heavy, with 7.2 million shares, Omnicom's second-highest trading volume ever, after Friday's 9.1 million shares.

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