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December 22, 2008
Not Worth the Paper They're Printed On
The Washington Post
by Steven Levingston
One of the world's most-respected investment-research firms doesn't think the company behind Atlantic Yards is in very good shape.
Morningstar tried to put it delicately and hedged enough to say things could change, improving the companies' fortunes, but in the end there was no polite way out: "If we think a stock is worthless, there's no point in saying otherwise," the investment research company said in a recent report.
The company presented five stocks that its team of analysts deemed to have a fair value of zero. Morningstar stock analyst Matthew Coffina pointed out that the company made similar calls on several stocks in mid-2005, with mixed results. Back then, two companies whose stocks it targeted, Delphi and Delta Air Lines, filed for bankruptcy protection. Three others, Great Atlantic and Pacific Tea, Elan and AK Steel, soared afterward before plummeting again. "I'd ... like to emphasize the perils of making $0 fair value calls," he writes.
That said, he also says it's important to point out that if shareholders can sell what Morningstar deems a worthless stock now for, say, 50 cents, they have gotten themselves a good deal. In introducing the worthless stocks, Coffina said, "We think equity holders in the following companies would be better off investing in dinner and a movie, as a break from this wretched economy."
...Forest City Enterprises: Severe financial distress, slowing operating cash flow, may need to refinance debt at high rates.
NoLandGrab: Despite Forest City Enterprises' precarious financial state, New York State and New York City elected officials still seem intent on throwing precious public dollars at the company's Atlantic Yards project, while paying lip service to the need for drastic belt-tightening.
Posted by eric at December 22, 2008 11:34 AM