Stock in Interpublic Group, the globe's third largest marketing services conglomerate, briefly hit a two-year low on Tuesday, plummeting by almost 9% to $10.05 (€8.42; £5.75). During the day, however, it recovered to $10.71 as investors digested the news that sparked the panic selling.
The cause of their alarm was seemingly IPG's announcement - made after close of trading on October 17 - that it plans to sell up to $575 million in new convertible preferred stock to institutional investors. The money would be used "for general corporate purposes."
According to Merrill Lynch media haruspex Lauren Rich Fine, the IPG offering is likely to dilute its 2006 earnings per share by 25%, from 20 cents to 15 cents. She interprets the move as "shoring up its balance sheet," with the rider that some money "could be used for small tactical acquisitions".
Interpublic chairman/ceo Michael Roth says the company will use the money to pay for vendor credits, plus professional fees such as accounting and severance payments. He was unforthcoming as to details of the latter, but it seems clear the troubled group is preparing for more job cuts.
Data sourced from AdAge (USA); additional content by WARC staff