Posted on 05/01/2005 7:05:21 PM PDT by MeneMeneTekelUpharsin
Big electricity producer Calpine Corp. said it asked the New York Stock Exchange to investigate trading of its stock and "reckless and unfounded rumors" about its finances that have circled the company the past two weeks, pushing its stock down 35%. Calpine sought to reassure investors on Friday that is able to meet its obligations. The company said it will report first-quarter earnings Thursday that will be in line with earlier projections. Specifically, it said it will report a loss of 38 cents a share for the quarter and expects a loss of 80 cents to 90 cents a share for the year. On Friday, Calpine stock rose 34 cents to $1.79 at 4 p.m. in heavy trading.
Stock in the San Jose, Calif., company came under intense pressure about two weeks ago, after an investment firm, Harbert Distressed Investment Master Fund Ltd., challenged Calpine's ability to sell a power project in the United Kingdom. In an unusual move, Harbert on April 13 publicly issued a letter that challenged Calpine's intentions to honor its legal commitments to bondholders and accused Calpine of attempting an "end run" around its obligations. The letter concluded with a threat of legal action.
Calpine spokesman Bill Highlander said Friday that Calpine is well aware of its legal and moral obligations to bondholders and never has had any intention but to honor them fully. A representative of Harbert, senior managing director Philip Falcone, didn't return a phone call Friday. On April 22, trading in Calpine stock was briefly halted when rumors again pushed the stock down as low as $1.69 before the company put out a release reassuring investors it wasn't in default on any loan covenants. The stock closed that day at $2.19.
Christopher Ellinghaus, an equity analyst for Williams Capital Group, said that "normally an investor with a problem tries to work it out with the company privately and doesn't go around putting out press releases." Calpine has said it doesn't have any intention or need to seek bankruptcy protection. It's the object of extensive short-selling interest, though, meaning that those investors stand to profit from drops in the stock, which may help to propel rumors.
(END) Dow Jones Newswires
01, 2005 19:43 ET (23:43 GMT)
It was manipulation by a short-selling hedge fund IMHO in conjunction with market makers IMHO that led to the sell-off, forcing margin calls, leading to more sell-off, followed by massive covering by short sellers who had 233 million shares of Calpine sold short prior to the bloodbath and some of them apparently "naked shorts" since Calpine is on the shortlist of securities with that problem. :-D Loving it.
I've seen bankruptcy declared on similar activity although CPN has cash and a very high Book Value/Share that is real assets.
It was totally wrong for someone to start such a rumor. Obviously, some short sellers were able to cover and avoid wipeout. Problem is, they wiped out a lot of small investors. The entity responsible for starting that rumor should be indicted, convicted and imprisoned. It didn't hurt me at all and help my family members. But, that doesn't make it right.
I am somewhat surprised that little or no interest exists on this board for some of these matters.
Amen to that. I worked for Social Security. People have NO idea.
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