Thornburg Mortgage (TMA) was just suspended from trading on the NYSE. Its price has been below $1 for too long. It trades at $.24. Extraordinary, because it 52-week high is $140.50.
Losses and fear of more losses have taken Fannie Mae (FNM) down to $.87. It traded as high as $40.45 a year ago. The situation is not much better at Freddie Mac (FRE). It sits at $.88 off its 52-week high of $37.18. Remember, these companies were the twin pillars of the US mortgage industry.
The number of important companies which have become penny stocks and the play things of day traders is remarkable, and probably says more about the market than the fact that the DJIA has dropped 40% in a year. Many of the firms trading under $1 were mainstays of their industries. And, some stocks which threaten to drop below the line are shares companies which are critical parts of the national economy.
Sirius XM (SIRI) was considered one of the premier new media and technology companies in the world. Its plan to get scores of channels into every car in America and allow people to listen uninterrupted coast-to-coast was as brilliant as it was simple. And, the technology worked well. But, as the credit markets were destroyed, so was the firm’s ability to refinance its debt. The fall-off in car sales dealt it another blow. The shares change hands at $.16. The stock was at $3.89 a year ago.
Level 3 (LVLT) was an equally promising company. It has 50,000 miles of broadband backbone, perfect for sending data, video, and VoIP, all growing businesses. While the operation’s prospects were promising, the firm’s debt was not. Leverage cost the stock a lot of fans. It now trades at $.79 down from a 52-week high of $4.48.
Charter Communications (CHTR) is one of the country’s largest cable companies. With the popularity of cable-based broadband, VoIP, and VOD its business should be doing well. The credit crisis killed Charter’s chances to compete with phone companies and satellite TV. It trades at $.16 down from a 52-week high of $1.68.
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The lesson that Wall St. can take from this is that a prolonged lack of access to credit and an ongoing banking and housing crisis could take shares in a number of other very well-known companies into the pennies which will make them candidates for delisting and wild price swings from day traders moving in and out of the shares.
Ford (F) has to be near the top of that list, if Congress does not act on behalf of the car companies. It traded at $1.01 about a month ago. It sits at $2.66 now A lack of financial support from the federal government would strengthen concern that Ford cannot borrow money or refinance its current debt load
Citigroup (C) has traded as low as $3.05. If the bank posts huge losses in the fourth quarter of this year and early into next, the government may have to force feed the firm more capital to keep it alive. Common shareholders could be left holding the bag as they were with AIG (AIG) which got as low as $1.25 after its deal with Washington. AIG could certainly drop below $1 as well, particularly if it has to go back to the well for more cash.
E*Trade’s (ETFC) problems with its mortgage portfolio continue to raise questions about whether the company is a viable standalone candidate, despite the value of its discount brokerage arm. The stock has already been as low as $.79 and trades at $1.15. now. Another bad quarter is all it will take.
Sprint (S) has traded as low at $1.35. Investors are concerned that if the cellular service provider keep losing customers to Verizon Wireless (VZ)(VOD) and AT&T (T) that it could stay in the red for a very long time. The company’s $22 billion in long-term debt is not doing it any good.
As odd as it may seem, The New York Times Company (NYT) could move below $1. It has been as low as $4.95. Stocks of other public newspaper companies, JRC and Gatehouse, are already below a dollar because of falling advertising revenue and high debt service costs. Shares of newspaper chain McClatchy (MNI) have been as low as $1.45 down from a 52-week high of $15.25. If NYT does not find a way to handle its own debt and cut costs at its regional papers, traders will sell the shares down the way that they have other newspaper stocks.
A deep recession coupled with a lack of availability of credit has pulled some large and well-known companies down. That process is not over.
Douglas A. McIntyre
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