Category: Archive

Eircom stock tumble worrying to investors

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — The recently privatized Telecom Eireann — now called Eircom — is in the doldrums. The shares plummeted below the issue price last week, leaving many sweating buyers who borrowed cash facing a loss with no sign of the price bottoming out.

The shares were launched in July at $3.90 and hit a high of $5.10 cents on the first day of trading. Those who managed to sell in the early days made a "stag" profit of up to 31 percent. It has been downhill ever since. with the price plunging to $3.65.

In all the launch hype, the share offer did carry a health warning that "shares can fall." Many of the record 574,082 who entered the stock market for the first time ignored the small print and expected the share price to continue soaring.

The collapse has caused widespread shock. There are squeals of anguish from callers to radio chat shows looking for somebody to blame.

That they are "virgin" share buyers with unreal expectations is obvious. They want the board of directors fired, an agm called, a special dividend, anything.

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The collapse in the stock over the summer may cause problems for the government’s privatization program. Many of the first-time punters in Eircom never expected to lose money. They will be expected to be nervous about taking another gamble on the market.

Worst hit are those who borrowed money to buy the shares and watched their chances of a profit pass them by in the summer.

They will have to pay interest costs on the loan or overdraft and stockbroker dealer costs as well as getting less than what they paid for

the shares in the first place.

Only about 12 percent of those who bought shares have sold so far.

The price collapse is being blamed on a range of factors:

€ foreign institutions off-loading their share allocations;

€ telecommunication shares losing some of their glamour;

€ an opinion among international analysts that the Irish economic bubble is about to burst;

€ the prospect of higher U.S. interest rates being announced by U.S. Federal Reserve boss Alan Greenspan next month.

Telecom Eireann became Eircom earlier this month with rebranding and new livery costing £6.5 million.

Group chief executive Alfie Kane said the company was going international with the initial focus on the UK and U.S. markets and exploiting existing partnerships in Europe.

It plans to generate 20 percent of revenues from outside Ireland within five years. Sleepless punters will be hoping for good news when Kane announces interim results in November.

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