Dana stock stuck under $1 a share
21.11.2008 17:20
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- Source: toledoblade.com
Skiers may have developed an affinity for Dana Holding Corp.'s black-and-blue diamond corporate logo: On the slopes - just like on Dana's stock chart - that is the warning sign for a steep downhill slide. The stock of the Toledo auto parts maker and the city's largest company has been hammered since the firm emerged from bankruptcy protection at the end of January. The shares, which trade under the symbol DAN, fell below the all important $1 per share threshold on Monday and have remained under that level. The price closed at 51 cents a share yesterday, up 11 cents, on volume of 4.5 million shares, or almost five times normal volume. That means the stock can be referred to now by the less-than-desirable "penny stock" label and the situation threatens to remove it from the New York Stock Exchange. It also poses other problems. The New York exchange says that a company can be delisted if its average closing price is below $1 for 30 consecutive trading days. Then, the firm has six months to get back above $1 to stay on the exchange. Companies in danger of be-ing delisted, a NYSE spokesman said, sometimes conduct "reverse stock splits" - trading two or three shares for one - in hopes of getting back above the magic $1 level. But it doesn't always work, said Scott Peterson. "NYSE does reserve the right to delist a company at any time," he said. "At this point in time, we have no plans to suspend our rules." Dana spokesman Chuck Hartlage said the firm couldn't comment on its stock price or its impact. Dana's stock, which was newly issued and given to creditors in lieu of $3 billion in claims when the maker of axles and other auto parts emerged from Chapter 11 bankruptcy protection at the end of January, has dropped 97 percent in value since it closed at $12.70 a share on Feb. 1, its first day of post-bankruptcy trading. It had been projected beforehand to open at about $22 a share and it opened trading at $14.50, but never got close to that figure again. In the last week, Dana's largest institutional investor, hedge fund manager Silver Point Capital LP of Greenwich, Conn., sold almost 7 percent of its 8 million shares of the stock, according to U.S. Securities and Exchange Commission filings. The average sale price of the 553,000 shares was just over 78 cents. The company still holds 7.5 million shares. A spokesman for Silver Point said the firm does not comment on its stock trading. SEC filings show that 77 percent of Dana's stock is owned by institutional investors, such as hedge, pension, and mutual funds. Those holdings haven't changed dramatically in months, even as Dana's stock price continued to slide, along with the rest of the stock market, and the automotive industry. Brian A. Johnson, an automotive analyst with Barclays Capital, warned last month that Dana faced a potential of violating the covenants of the loan agreements that allowed the company to emerge from bankruptcy. He downgraded the stock from "overweight" to "equal weight" at the time, along with stocks of several other auto suppliers. Such a low stock price for a company as large as Dana - it had revenues last year of $9.2 billion and was listed at No. 283 on the Fortune 500 for 2007 - can have dramatic consequences, according to analysts. Dana's market capitalization, the combined value of all of its stock, was just over $51 million yesterday, which increases its attractiveness as a potential takeover target. The low stock price could make it difficult to maintain necessary ongoing financing, as investors or lenders worry about the potential of another bankruptcy. Haig Stoddard, an automotive industry analyst with Global Insight, said Dana's stock troubles are understandable given the treacherous waters the entire industry is in. "It's all the uncertainty of whether the government is going to do the [auto industry] bailout, since Dana is heavily dependent in North America on the domestic automakers," Mr. Stoddard explained. "Until it gets sorted out, it's likely that the stock price on auto suppliers will stay rather low." He said neither the Toledo company nor other suppliers are in danger of being purchased in the current climate. If anything, he said, some suppliers may be merged. Contact Larry P. Vellequette at:
lvellequette@theblade.com
or 419-724-6091.
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