Saatchi & Saatchi Decision to Forgo Dividend Sends Stock Price Tumbling

Friday’s announcement that the battered advertising giant’s balance sheet was too weak to pay a regular dividend sent Saatchi shares tumbling. Although the company had warned shareholders this year that the dividend might be sacrificed in a campaign to shore up the company’s capital position, shareholders unloaded their holdings, immediately driving the share price down 18 pence (34 cents) to 45 pence a share. The stock rebounded slightly, ending the day on London’s Stock Exchange at 52 pence, down 11 pence from the previous day’s close. “They do have an ability to slip on banana skins repeatedly,” said Neil Blackley, an analyst with James Capel Securities in London. The decision to scuttle the dividend follows a depressing drumbeat of bad news for the once-expansive advertising and communications company: divestitures under pressure, salary cuts and reorganizations, and defections of top advertising managers. The write-offs stem from sales of Peterson & Co., a litigation support concern, and Hay Co., a consulting firm. Having paid #42 million for Peterson in 1987, Saatchi received only #1.2 million for it in a buy-out by its managers. Saatchi sold Hay to a group of its managers and outside investors for $90 million. It bought the consultancy in 1985 for an undisclosed sum.
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Carrington, Tim

Full text: [Wall Street Journal] Sep 10, 1990

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Japan’s Equity Warrants Crippled by Market Collapse

The collapse of Tokyo stock prices has devastated the market for Japanese equity warrants, crippling what had been one of the most lucrative and popular sectors of the London-based Eurobond market. Many Japanese companies sold equity-warrant bonds as an inexpensive way of raising money during the Tokyo stock market’s heyday. Companies could issue bonds that paid interest of only a fraction of 1%, by attaching equity warrants as an inducement. More than $70 billion of Japanese equity warrants have been issued in the past three years. But since the start of the year, Japanese stocks, as measured by the 225-share Nikkei average, have lost more than 38% of their value — the market’s steepest loss in a single year since World War II. While there isn’t any formal index measuring performance of the warrant market — most transactions take place in London, outside the purview of Japanese regulators — some analysts believe warrant prices are off as much as two-thirds.
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Chandler, Clay
Brauchli, Marcus W

Full text: [Wall Street Journal] Sep 10, 1990

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ASK MONEY

Carefully – and rarely. When you sell a stock short, you’re making a bet that the stock’s price will decline. Here’s how it works: Suppose you think that the chances of ZipCo International, currently selling at $10 a share, are pretty dismal. You borrow 100 shares from your broker and sell them on the open market for $10 each, or $1,000. You now owe your broker 100 shares of ZipCo. Now suppose Zipco slides to $8 a share. You buy 100 shares for $800, give your broker the shares, and pocket the $200 difference between the price at which you sold and the price at which you bought – less the broker’s commissions, of course. The problem with selling short: A $10 stock can sink 100%, to $0, but there’s no limit to how far it can rise. So you can lose far more than you invest when you sell short. In addition, when you sell short, you owe your broker for any dividends the stock might have paid while you were borrowing the stock. If the general partnership has gone down that long lonesome road to involuntary bankruptcy, the chances of getting cash from your partnership are pretty limited. If you want to take legal action, you’d probably have to prove that you were misled about the investment. If your broker guaranteed that you could transform $20,000 into $150,000 in 10 years – a 750% gain – you might have some good legal footing. Bear in mind, however, that many partnerships sold before 1986 often counted tax benefits as part of their returns, so you first would have to tally up your tax benefits from the partnership before you could get an accurate assessment of what you lost. In addition, you’d have to prove that the broker, brokerage house or general partner misled you. Your best bet: Consult your attorney.
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Full text: [USA TODAY (pre-1997 Fulltext)] Sep 10, 1990

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Stock prices recover but Canadian dollar skids

The Canadian dollar, however, fell more than half a cent against its U.S. counterpart in opening trading today as fallout continued from unemployment figures released last week and the NDP victory in Ontario. Commenting on the NDP sweep in Ontario, Mike McCracken, head of Informetrica Ltd., an Ottawa-based economic think tank, said voters facing rising unemployment and likely a recession, wanted a government that would put jobs and social programs ahead of fiscal management.
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Full text: [The Vancouver Sun] Sep 10, 1990

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Photocomm Shines With Solar Technology

As the latest Middle East crisis continues to heat up, solar technology companies such as Scottsdale-based Photocomm Inc. are gaining strength and generating more interest. For one thing, the company’s stock has performed well over the last month while other issues have taken a dive, says Thomas LaVoy, Photocomm’s chief financial officer. The stock, listed on NASDAQ, closed at $1.31 per share Aug. 31, having ranged between $2.50 and 63 cents during the past 52 weeks. Also during the past month, renewed interest in energy conservation has encouraged a number of first-time customers to buy solar power equipment, he adds. (excerpt)
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Luebke, Cathy

Full text: [The Business Journal] Sep 10, 1990

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Airline stocks lose altitude after flying high in ’89 Series: TICKER TALK

That set off a shock to investors’ confidence that drove the Dow Jones industrial average down 190 points in what was billed as a “minicrash.” “The same factor that has created a panic in the broad market is working overtime on the transports, and it’s easy to see why,” says Stephen Leeb in his investment advisory letter Indicator Digest. “There’s a risk that higher oil prices will further torpedo earnings in the short term. But with the recent selloff, that’s already reflected in these stocks’ prices.”
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CHET CURRIER

Full text: [St. Petersburg Times] Sep 10, 1990

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Bank Stock Trades Fall Below 100 Percent of Book Value

For the first time in 10 years, stocks of 14 Southeastern bank holding companies as an average are trading below 100 percent of their book value, according to Williams Securities Group Inc. Banks also have stopped performing “monolithically” in the market, instead gaining or losing depending on market assessment of the institution’s strength, said Tim Rayl, a bank analyst with the Tampa firm. “The good ones have gotten soggy, but the bad ones keep going down,” Rayl said. Southeast Banking Corp. experienced the lowest bank book value per share, which is calculated by subtracting a bank’s liabilities from assets and dividing that figure by the number of shares outstanding. Southeast, the only bank stock trading below 50 percent of book value per share, brought the average below 100 percent for the first time in a decade. Its stock closed at $8.62 a share, which represents 41 percent of its book value of $20.89 a share. (excerpt)
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Zisser, Melinda

Full text: [South Florida Business Journal] Sep 10, 1990

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TOKYO MARKET UP IN SUMMIT RESPONSE

Stock prices soared in Tokyo today, and the Tokyo Stock Exchange’s main index posted its sixth-largest daily gain in response to the U.S.-Soviet summit, traders said.
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Full text: [Seattle Times] Sep 10, 1990

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BUSINESS INSIDER

To call Toys R Us a cult stock would be an understatement. The Paramus, N.J.-based toy retailer has been on Wall Street’s most-admired list for years, riding the coattails of the baby boom, the Nintendo boom, the Barbie boom – you name it, Toys R Us was hot. Its stock, which cratered to 10 in the 1987 stock market crash, rebounded to a high of 35 in mid-July as the overall stock market soared. When stock prices began sliding in mid-summer, so did Toys, which closed Friday at 23 1/8 – a notch above its 52-week low of 22 1/2. The significance, say analysts, is that Toys is now selling where it was in March. Electronics represent about 18 percent of the domestic sales of Toys R Us, with Nintendo contributing about 85 percent of that, according to [Sean McGowan].
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Herb Greenberg

Full text: [San Francisco Chronicle (pre-1997 Fulltext)] Sep 10, 1990

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Markets bolstered by summit

In Tokyo, stock prices soared, with the Tokyo Stock Exchange’s main index posting its sixth-largest daily gain in response to the summit news. Analysts said the joint statement from President Bush and Soviet President Gorbachev condemning the Iraqi takeover of Kuwait gave investors confidence. In Japan, the Nikkei average closed up 1,118.83 points, or 4.67 percent, at 25,080.90 after gaining 150.16 points on Friday. London’s Financial Times-Stock Exchange index of 100 leading shares rose 1.18 percent, or 25.1 points, to 2,148.0.
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Full text: [San Diego Tribune] Sep 10, 1990

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Tokyo Stocks Up; Dollar Off

Despite mild bullishness on the Tokyo Stock Exchange, investors remain cautious, the brokers said. ”I don’t think anybody really believes the market is posting lasting gains,’ said Philip Gordon-Lennox, the fund manager at the Nippon Credit Bank. ”Financial institutions can’t make any money in this market, so they’re just sitting around,” said a broker at a large Japanese securities house.
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Reuters

Full text: [New York Times] Sep 10, 1990

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Market Watch Bottom Fishing for S&Ls

The big attraction in the S&Ls now is the chance to pay 50 cents for assets that are worth $1. As investors have fled the S&L stocks on worries about problem loans and the institutions’ capital levels, the stock prices have fallen well below adjusted book value. That’s the theoretical net value of the assets, after paying all debt and subtracting intangible assets such as accounting goodwill. The shares of Glenfed, CalFed, Downey Savings and most other S&Ls now trade for sharp discounts to their book values, as shown in the accompanying chart prepared by Sutro analyst Campbell Chaney. That leaves individuals such as [Theodore Kruttschnitt], or non-bank companies, to grab the S&L stocks and make some noise. The problem here is that takeovers of S&Ls by individuals or non-bank companies aren’t easy. To buy more than 10% of an S&L’s stock, an investor has to file an application with the federal government. And at the 25% ownership level, an investor becomes a bank holding company in the government’s eyes. The regulatory restrictions can become a nightmare. Many California S&Ls fully meet the government’s capital requirements and could be using at least some of their quarterly profits to buy back stock. That could well be the highest-return use of corporate cash right now, but S&Ls aren’t doing it, fearing the regulators would have a fit.
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TOM PETRUNO

Full text: [Los Angeles Times (pre-1997 Fulltext)] Sep 10, 1990

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Program trades need big money

Northeast Bancorp Inc. last week amended its multimillion-dollar lawsuit against the Bank of New York, claiming the Bank of New York failed to maintain an adequate capital position to support its proposed acquisition of the New Haven-based bank holding company. Northeast Bancorp, parent company of Union Trust Co., Stamford, amended its complaint in U.S. District Court in New Haven, contending that the Bank of New York’s acquisition of Irving Bank Corp. in 1988 reduced its capital levels below Federal Reserve Board requirements. (excerpt)
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WILLIAM DOYLE

Full text: [Houston Chronicle (pre-1997 Fulltext)] Sep 10, 1990

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Northeast Bancorp Expands Breach of Contract Suit Against Bank of New York

Northeast Bancorp Inc. last week amended its multimillion-dollar lawsuit against the Bank of New York, claiming the Bank of New York failed to maintain an adequate capital position to support its proposed acquisition of the New Haven-based bank holding company. Northeast Bancorp, parent company of Union Trust Co., Stamford, amended its complaint in U.S. District Court in New Haven, contending that the Bank of New York’s acquisition of Irving Bank Corp. in 1988 reduced its capital levels below Federal Reserve Board requirements. (excerpt)
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Stableford, Joan

Full text: [Fairfield County Business Journal] Sep 10, 1990

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Losses Hurt Thorn Apple

Southfield-based Thorn Apple Valley Inc. blames a loss for its fiscal year, which ended May 25, on higher livestock and material costs, undervalued inventory and a shakeout in the industry. Louis Glazier, Thorn Apple executive vice president of finance and administration, said the company “would have made $200,000 for the quarter” if it weren’t using the “last-in, first-out” method of inventory valuation. That method values inventory at old prices that don’t reflect the higher costs of livestock and materials, he said. “Demand for meat is steady. We’re reasonably optimistic things will improve,” Glazier said. (excerpt)
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Goodin, Michael

Full text: [Crain's Detroit Business] Sep 10, 1990

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Judge: Great Lakes Defrauded Clients

Farmington Hills-based Great Lakes Equities Inc., and its principal officers, defrauded its customers by misrepresenting the financial condition of several thinly traded penny stocks and then charging excessive markups on the stock prices, a U.S. District judge ruled last week. Saying Great Lakes Equities, its president G. Reynold Sims, Vice President Eric Bryen, and a broker, Lawrence Kowal, lied to their customers, Judge Paul Gadola permanently enjoined the company and executives from violating anti-fraud provisions of the federal securities acts. And Gadola said he would hold “disgorgement” hearings to “deprive the defendants of the profits they derived from the fraudulent conduct.” (excerpt)
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Lindstrom, John

Full text: [Crain's Detroit Business] Sep 10, 1990

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Motorola Stock Tumbles

Motorola Inc’s cellular communications business is providing a crucial safety net for the company’s tumbling stock price. The Schaumburg-based company’s stock fell 14% last week after Motorola announced it expects slower growth for its semiconductor business. Also hurting the stock price were reports that Motorola is delaying customer delivery of its highly touted new microprocessor, called the 68040. Despite last week’s news, industry analysts say Motorola’s industry-leading cellular communications business — coupled with explosive growth of more than 50% in that market — is likely to cushion the stock’s fall. (excerpt)
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Oloroso, Arsenio, Jr.

Full text: [Crain's Chicago Business] Sep 10, 1990

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Survey Says: Area Stocks Bring in Top U.S. Return

Cincinnati investors like to boast that companies based here have stocks that can beat the band. A rare survey now shows that Cincinnati stocks also can beat those of companies in Cleveland and Columbus, and in the 30 Dow industrials and the Standard & Poor’s 500 stock indexes. In its August issue, Money magazine profiled 40 U.S. cities’ stocks for a three-year period ended June 30. Each city index contained at least 10 companies based within 100 miles of the named city or area. The cities were ranked according to the combined average year-to-year percentage change in value of the stocks in companies with principal offices within those cities. (excerpt)
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Olson, Thomas

Full text: [Cincinnati Business Courier] Sep 10, 1990

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Ringing in stock year with dismay

The public’s attitude is just one of the many hurdles the stock market faces as it enters the fall – which, to Wall Street’s mind, is the equivalent of beginning a new year. As traders came back from Labor Day breaks and summer vacations last week, they also faced a major psychological barrier – in two of the past three years the stock market has celebrated the arrival of fall by falling. All those facts haven’t gone unnoticed by foreigners, who seem to have pulled away from the U.S. financial markets. They’ve been lured away, the experts say, by higher interest rates and greater security overseas, and pushed away by the rapid deterioration in the value of the dollar. And even professional investors and money managers, while publicly extolling the stock market’s virtues, appear to be turning as cautious as small investors after this summer’s volatility in stock prices. H. Erich Heinemann, chief economist at Ladenburg, Thalmann & Co. Inc., says private demand for credit is “falling like a rock” as the economy slows. And he thinks this will offset the federal government’s insatiable appetite for borrowing and prevent interest rates from rising.
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John Crudele

Full text: [Chicago Sun - Times] Sep 10, 1990

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Mid-American Sues Over Collapse of Florida Deal

Mid-American Waste Systems Inc. plans to file suit over the apparent loss of a lucrative Jacksonville landfill deal that caused the company’s stock price to plunge. On Sept. 4 a company spokesman said Mid-American had the lawsuit prepared and ready to file in an attempt to keep Jacksonville, Fla., from negotiating a landfill contract with Waste Management Inc. Until Jacksonville decided in late August to negotiate with Waste Management, Mid-American and many stock analysts thought that Mid-American had a lock on the deal. (excerpt)
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Proctor, Gordon

Full text: [Business First] Sep 10, 1990

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