Mark Collins – Bombardier a Penny Stock: TSX Listing?

That corporate welfare from the feds can’t come soon enough–the hits keep coming:

Bombardier Tumbles to 25-Year Low a Day After Breaching C$1

  • Drop of 31% this year sparks risk of removal from stock gauge
  • Investors lose confidence over struggles with C Series jet

Bombardier Inc. fell to a 25-year low, a day after breaching C$1 as investors lost patience with delays and costs on the Canadian aircraft maker’s new series of jets.

The company’s widely traded Class B stock dropped 9 percent to 91 Canadian cents at 9:51 a.m. Thursday [Jan. 28] in Toronto, after declining to 90 Canadian cents, its lowest level since January 1991. The shares traded as low as 98 Canadian cents Wednesday before closing at $1.

The stock’s 31 percent rout this year raises the prospect that the aircraft maker will be thrown out of the main Canadian stock gauge — a development that would bring additional pressure by forcing index funds to sell their holdings.

Investors have abandoned the shares as the 73-year-old company struggles with the development of the C Series, a jet with as many as 160 seats that is two years late and more than $2 billion over budget. Originally a snowmobile maker, Montreal-based Bombardier grew into a train and aircraft maker that is credited with inventing the regional jet in the 1980s.

“There is a huge lack of confidence now,” David Tyerman, an analyst at Cannacord Genuity, said after Wednesday’s decline. He cited United Continental Holdings Inc.’s decision last week to place an order with Boeing Co., rather than Bombardier, as well the removalof some jet orders from the Canadian company’s backlog. “If they pick up a C Series order, all of this could change in a hurry. This is all very much sentiment-driven.”

Index Review

A stock must have an average price of at least C$1 for the previous three months to remain in the S&P/TSX index after each quarterly review, according to Tony North, senior manager of equity markets for S&P Dow Jones Indices. 

Bombardier’s stock may get a temporary boost if the company wins support from the Canadian federal government, which is considering an aid package for the aircraft maker, said James Telfser, a money manager at Aventine Management Group Inc. Still, any rally would just give investors an opportunity to sell, said Telfser, who helps manage C$100 million ($70 million) for the Toronto-based hedge fund. Aventine doesn’t own Bombardier shares.

A Disaster

“It’s been a disaster of a story,” Telfser said in an interview at Bloomberg’s Toronto office…

Plus:

A shortage of new aircraft orders for Bombardier Inc. could force the Canadian plane maker to cut production further… 

Bombardier is poised to report its worst year for aircraft orders since 2009 when it announces fourth-quarter and full-year results Feb.18, according to analysts at Macquarie Capital Markets Canada Ltd. The plane maker last week lost a key United Continental Holdings Inc. order for 40 narrow-body airliners to rival Boeing Co., although it is still in talks with United on a separate sales deal that could be even larger.

Based on data through the first nine months of 2015 and information disclosed during the fourth quarter, Bombardier is on track to report new bookings for 99 planes for fiscal 2015, Macquarie said. That’s less than half the 282 tallied the year before and implies a 34-per-cent year-over-year drop in Bombardier’s aerospace backlog in a best-case scenario, according to Macquarie.

“That’s a red alert, in my view,” Macquarie analyst Konark Gupta said Tuesday, because Bombardier’s estimated order book of 324 planes at the end of 2015 equates to about 14 to 15 months of assembly work. “It’s not enough. Historically speaking, they have had more than two or three years of backlog. And now we’re talking about less than two years.”..

Recently:

Saving Bombardier’s CSeries Jetliner: Delta? Iran?

Mark Collins, a prolific Ottawa blogger, is a Fellow at the Canadian Global Affairs Institute; he tweets @Mark3Ds

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10 thoughts on “Mark Collins – Bombardier a Penny Stock: TSX Listing?”

  1. Yikes–stock below 80 cents Canadian:

    Mark Collins

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